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Creating a new document is easy. Simply select the format in which the file should be (Word, PowerPoint, Excel or OneNote) and type in the document name.
Word Web App is a slimmed down version of Microsoft Word 2010, as are the rest of the Office Web Apps. Word Web App is automatically updated by the folks at Microsoft, so as and when new features arise, these will appear seamlessly.
Not all functionality appears, but the very basic and only necessary features are built-in to the Office Web Apps. These will include styling, formatting, formulas in the case of Excel, and picture management.