I'm running Word 2007 but I've noticed this with earlier versions as well.
It appears that when I open and work on a document in word, the system creates a hidden file with a weird file name residing in the same folder. This is probably what allows me to auto-recover the file after a crash.
Unfortunately, when I hit save, it appears the system deletes the original file and renames the hidden file. This is a big problem for me because I'm often editing a file that is under source control (the documentation for my employer's product) and when that happens Visual Studio / Team Foundation Server assumes the file has been deleted and it vanishes from the product and from source control.
Any way to get this functionality to go away?