One of the most amazingly useful features designed into Office is the red-squiggle underlined spell checking introduced in Word 95.
Spell checking before that was a rather modal process: type some words, hit the spell check button, wait for a dialog box to open up to show the next spelling error, click one of the buttons in the dialog box, and then repeat the process over and over again.
I was just starting college when I saw the red squiggle for the first time and I remember thinking "this changes everything." What I once considered to be a tedious, lengthy chore became something that I didn't have to think about at all. I made my corrections as I went, just like I fix other errors as I type. For me, the feature makes me feel freer to concentrate on my writing.
I think it has also contributed to increased proficiency as a speller. The red squiggles make wrong words look wrong on the page. As a result, an association is created between the wrong spelling and the negative reinforcement of seeing a big red line under it. I feel like I can tell when I've typed incorrectly spelled words sometimes--some part of my brain triggers, knowing that a red squiggle is about to appear. Maybe it's in my imagination, but I do feel like I type fewer misspelled words than ever before in my life.
Some people feel that red squiggle spelling is problematic because it takes your mind away from the process of putting thoughts on the page. I suppose I can see that, but I still prefer the "as you go" approach personally. In Office 2007 you can continue to use both ways of spell checking, of course.
Eventually a similar feature for grammar was introduced, in which potential grammatical errors are underlined with green squiggles. My goal is to write well enough to hardly ever see these pop up, but from time to time I fail and I do like the ability to correct these errors on the fly. In some ways, the as-you-go grammar check is even more useful, because correcting a grammar error often requires reordering words in a sentence or rephrasing a thought.
Now, in Word 2007, a new kind of squiggle is being introduced: the blue squiggle. There's a new feature in Office called "contextual spelling" and it’s designed to detect words that are correctly spelled but improperly used.
An example: it seems to me that 90% of the Internet world believes the English word lose is actually spelled loose.
"This is one battle I'm not willing to loose."
"I need to loose thirty more pounds."
In fact, there are whole web pages set up to help people learn that there's a difference between the words.
This is the kind of error that a traditional spell checker doesn't catch. Both "lose" and "loose" are valid English words; only the context of the surrounding sentence makes it clear that "loose" is the wrong word in these two sentences.
The contextual spell checker in Word 2007 flags errors like this by underlining them with blue squiggles and suggesting the correct word instead. If you have Beta 2 of Office 2007 installed in English, Spanish, or German, you should already have this feature enabled. (Note: I seem to recall that the feature is disabled in Beta 2 below a certain system memory threshold because it takes a lot of memory to perform all of the contextual analysis.)
The Speech and Natural Language group at Microsoft has been working on this feature for quite some time and they have a blog entry of their own where they explain more about the feature and how it works.