One of the key design tenets of the Office 12 user interface is making sure that the set of features you need to look through is as small as possible. Communicating the relevant features makes the program feel smaller and simpler and saves you time in finding what you're looking for and discovering what's possible.
Contextual Tabs are the most crucial piece of this puzzle. By showing the Picture Tools only when they could possibly work (i.e. when you are working with a picture), and doing the same with all other objects, the core Word/Excel/PowerPoint experience is vastly simplified.
But there are other details to which we have attended in order to help work towards this design goal. A key advance is the work we've done to support top-level command disabling.
Here's an illustrative experiment. Launch Word, and then click Close on the File menu to close the empty Word document. Word is still running, but no documents are open--something we call the "fishbowl."
Now, drop the Insert menu. Most things are disabled, but some commands are not. Picture and References, for instance, remain enabled. So, hover over those menu items to reveal... oh. Actually, everything on the Picture submenu is disabled after all. In fact, everything on the Insert menu is actually disabled, but you have to visit the entire menu hierarchy to reveal that fact. This is just the way dropdown menus work, and it can be confusing and frustrating.
And why do menus work this way? Not a usability reason, but a technical reason. Back in the earliest days of hierarchical menus, checking through the entire hierarchy looking to see if all the children (and children's children) were disabled would have been an expensive and potentially slow process. A trade-off was made to reduce usability in order to improve performance.
Flash forward to today. In the Office 12 Ribbon, any time all of the descendants of a control are disabled, the top-level control is also disabled. This can save you an time digging through the UI trying to figure out which feature you want to use. Communicating the disabled state at the top level means having a more accurate picture of what's available and what's not without wasting time and clicks. And, of course, in many common cases we try to communicate why a feature is disabled through Super Tooltips.
This is another example of one of those little details we hope will make an impact in making Office simpler and more usable.