Open Documents In Previous Versions Of Word
When Word 2007 opens a document created in a previous version of Word, it displays "Compatibility Mode" in the title, next to the name of the file. In compatibility mode, some Word 2007 functions may not be available (e.g. no smart graphics). You should stay in Compatibility Mode if you are sharing documents with people who use previous versions of Word. Hovering over a command that is exclusive to Word 2007 will display a tooltip explaining why the command is disabled. However there are some 2007 functions (e.g. SmartArt) that are available in Compatibility Mode but offer limited functionality.
You can convert documents using older versions to the 2007 version by clicking the Office Button > Convert. Performing this conversion can half the size of your document, so it's a good idea to do this if you want to save space.
Older versions (up to 2000) of Word can open 2007 format documents if your office installation is updated with the latest patches and service packs. On opening the document, you are asked if you want to download a converter. Read about Word 2007 file formats.
Alternatively, you could save your document with an older format so that the older Word can open without a converter. If you do this, however, you will not be able to take advantage of the new feature set.