(description taken from microsoft.com)
By installing the Compatibility Pack in addition to Microsoft Office 2000, Office XP, or Office 2003, you will be able open, edit, and save files using the file formats new to Word, Excel, and PowerPoint 2007. The Compatibility Pack can also be used in conjunction with the Microsoft Office Word Viewer 2003, Excel Viewer 2003, and PowerPoint Viewer 2003 to view files saved in these new formats. For more information about the Compatibility Pack, see Knowledge Base article 924074.
Note: If you use Microsoft Word 2000 or Microsoft Word 2002 to read or write documents containing complex scripts, please see http://support.microsoft.com/kb/925451 for information to enable Word 2007 documents to be displayed correctly in your version of Word.