MSFT's web version of office (office.live.com) actually handles Word, Excel, PowerPoint and OneNote in web browsers without any plugins. I am not sure why Google had to write this.
Office Web actually handles the files server-side, as does Google's own Docs/Drive. This is a purely client-side extension.
That could work for 2007+ documents, but probably not the older .doc files that were in the obscure binary format.
I guess it's not that easy, just look at Libreoffice, it still struggles with somewhat-complex files.