the old extensions from Office 2003 & prior were differentiated by at 3-digit extension: DOC, XLS, PPT.
Now with Office 2007 and newer, there are 4 digit extensions: DOCX, XLSX, PPTX.
The Office 2003 formats were binary. The new formats are actually zipped files. Try it. Take one of the new format documents, unzip with 7-zip or WinRAR (or equivalent), then inspect the unzipped files. XML, plus images, plus audio/video, plus formulas & formatting.
Also, the new formats take up a lot less space than the old formats. A new blank DOCX file takes up about 9K of space, a new blank DOC file takes up about 24-26K of space.
The new formats need to be handled by email servers correctly as it is a different format as you can see. By now most every email server in the world treats the new formats correctly. Except Exchange 2003 web mail, which treats it like a zipped file (like it truly is, but....) that confuses the end-user.
If you have Office 2003 and don't want to pay for a new Office 2007 (or Office 2010) version, use an Open Office derivative called Go-Open Office,
www.go-oo.org. It contains many import/export filters that aren't in the standard Open Office product. Nifty, free.
Sometimes, people will bring in documents made at home from Microsoft Works. Of course, these don't open nicely in MS Office (hello, Microsoft!). Just installing Go-OO makes the end-users life easier as they now have a way of working on those documents, w/o any additional costs.