Microsoft and Google are in a battle to be king of "the cloud". Both offer users a way to create, edit and share office docs online, but features vary a bit.
Microsoft Office 365 is Microsoft's online "cloud" services. It's not another version of Microsoft Office software, but rather a way for users of Microsoft Office 2003, 2007 and 2010 to share documents with co-workers online. Microsoft Office 365 was developed for business users (not home users).
Folks with Office 2003 and 2007 will have limited capability in the cloud ... businesses are encouraged to upgrade to Microsoft Office 2010 Professional for a better cloud experience.
For more information about Office 365, there's a book on Amazon.com that you can purchase called, Microsoft Office 365: Connect and Collaborate Anywhere, Anytime
For more information about Microsoft and Google's battle over the cloud, click here.