How do I convert back to new file format from compatibility mode?
Use the "Save As..." option, either in the quick access toolbar or in the File section and make sure to set the "Save As" type to "Word Document (*.docx)".
Selecting "Word 97-2003 document" as the file type will leave the file in the older format requiring compatibility mode.
Changing default "Save As" type:
If you want to change the default file save as type in Word 2007/2010 (this will only affect newly created documents, not ones that have already been created and saved and are only being edited currenctly):
In the File section, open Options. In the Save section, set "Save files in this format" to the desired default format.