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Microsoft provides a compatibility pack which helps with exchanging files between Office 2007 / 2010 and previous versions of Office.

But it's not clear from the description whether this means that Word 2007 and Word 2010 are completely interoperable - i.e., Can Word 2007 read and edit files created in Word 2010?

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Yes Word 2007 can read from Word 2010. That tool is going from .docx (introduced in word 2007) to .doc (the standard before 2007), so it is useful for going from 2007 or 2010 to a version prior to 2007 if the file was saved as a .docx. If it was saved as a .doc no conversion is required.

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Office 2007 can only read a document provided it doesn't contain any specfic 2010 features. This of course is the case with any version of Word. –  Ramhound Mar 22 '12 at 14:44
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