As long as you enter into the settings gear and take off convert uploaded files to Google Docs editor format and then select Google Docs to open the file.
Here’s the full list of supported filetypes, according to Google:
Word files: .doc, .docx, .dot
Excel files: .xls, .xlsx, .xlsm (macro enabled Excel files), .xlt
Powerpoint files: .ppt, .pptx, .pps, .pot
Embedded below is a GIF showing how to edit a Word Doc.