Although OpenOffice.org is just beginning to gain popularity in recent years, it is already putting a lot of pleasure on Microsoft. Take a look at the new Open Office 3.0 (Beta), it has pretty much everything that Microsoft Office 2007 has to offer, and more. Open Office was designed to be compatible with Microsoft from day one (at least for the most common basic features). There are a number of nice new features that was pioneered by Open Office, and Microsoft gladly copied into their latest products.
Take PDF for example. Adobe has published the PDF format for ages. Yet Microsoft never supported this format directly in all previous versions of MS Office, until Open Office comes with the PDF feature built-in. So now MS Office 2007 also has export to PDF capability, just so they can be on par with Open Office.
Another obvious example is the bibilography. Until now, people from academic circles pretty much all using LaTeX. The most important reason is that LaTeX provides a rich bibliography capability, e.g. through the BibTeX package. Open Office has built-in bibliography features since its inception. Now Microsoft also learn the lesson, and it is supporting bibliography in Office 2007.
Competition is sweat. Consumers are undoubtedly the biggest winner in this cat and mouse game.