Rumor has it that Google is readying the release of GDrive. This will give users a large amount of free online storage for their files. (And possibly a larger amount of storage for a fee). If true, this move will push users closer to the vision of using the Web for all your computing needs.
Web office suites, Google's own included, are already (albeit slowly) encroaching on one of Microsoft's two cash cows - Office. Just yesterday Zoho, makers of a complete set of (currently) free online business apps, upgraded their Writer program to support offline editing of documents via Google Gears. This allows user's to cache their top used online documents for modification when they are disconnected from the web. The documents then automatically synced the next time the are online. The solution is not perfect, requiring you to plan ahead and keep your browser open, but it is a step in the right direction.
Another online office solution live-documents, is taking a slightly different approach. Rather than go after MS Office head on, they are looking to embrace and extend. Their solution is to provide Office plug-ins that turn office apps into a 'web-enabled smart clients' that automatically sync your offline documents with your online versions. When you are at your desk you use MS Office, when online you use their Web Office. No matter which, your files are always kept in sync. Live-Documents is currently available as a 'technology preview'.