Google Docs is a free, Web-based word processor, spreadsheet, and presentation application offered by Google. It allows users to create and edit documents online while collaborating in real-time with other users.

Features:
Documents, spreadsheets, and presentations can be created within the application itself, imported through the web interface, or sent via email. They can also be saved to the user's computer in a variety of formats. By default, they are saved to Google's servers. Open documents are automatically saved to prevent data loss.
Collaboration between users is a feature of Google Docs. Documents can be shared, opened, and edited by multiple users at the same time. The application supports popular Office file types such as .doc or .xls. It also includes support for the OpenDocument format.

Limitations:
There is a limit on how much a user can store on his/her account. Each document must be under 500k plus 2MB for each embedded image. Each spreadsheet must be under 10,000 rows, 256 columns, 100,000 cells and under 40 sheets. A user can have a total of 5,000 documents and presentations, 5,000 images and 1,000 spreadsheets. The maximum number of spreadsheets that one can open at one time is 11[2]. Only presentations under 10mb can be imported. Users cannot easily hyperlink one Google Document to another. Users cannot easily share multiple documents. There is no notification system that alerts users when a document they are interested in has been modified. Docs are only accessible through Mozilla Firefox and Microsoft Internet Explorer

Related Links:
Google Docs
WikiPedia - Google Docs Entry