Google Docs & Spreadsheets is an online office suite.  It contains a word processor, spreadsheet program, slide presentation program, and survey creation program.

The advantage that programs like Google Docs provide students and teachers is they are cross platform, and you can access your data anywhere. 

What Google Docs does that programs like OpenOffice and Microsoft Office don't do is give users the ability to share documents.  You can set other users as collaborators or you can publish your files as webpages.