Open a Word 2003 document in Microsoft Office 2007 and click Insert SmartArt. You might be surprised at what you see. The beautiful Word 2007 SmartArt dialog disappears and all you have is the old Word 2003 diagramming tool.
At this point you might wonder exactly what has happened. The answer is that Word is operating in compatibility mode as you can see by looking at the toolbar. To convert the Word 2003 document to 2007 format so that you can use Word 2007 features such as SmartArt and Themes, click the Office button and choose Convert. Once the document is converted you can then use all the lovely new features of Word 2007 even on your older Word documents.