The difference is that the iPhone knows specifically to look at the table of contents of a ZIP file to decide if the contents are a supported iWork document, the same way Office 2007 knows to look at a .docx table of contents file (they are really .zip files) to get what it needs. Word 2007 isn't an unzipping program, it just knows how to use the format to get at the data. Same for the iPhone.

And yes Tony. It's been out for many years now too, just like iLife. They have equivalent programs to Word, Excel, and Powerpoint, and overall I've been able to use the $79 office suite to replace the $399 one out of MS.