It's a new file format. ".docx" files are basically zip archives (you
can change .docx to .zip and open the files in Windows) containing a
bunch of xml files.
The advantage of the ".docx" format is that it implements the 'open xml'
standard (both ECMA and ISO certified). This is important as governments
world wide are starting to ask for open standards for documents. The new
format also has some advantages for programmers: they make it much
easier to create and manipulate Office documents without user
interaction. Also, as ".docx" files are actually zip archives, they tend
to require less disk space.
As it is a new format, older versions of Word are not automatically
capable of handling the newer files. To solve this issue, Microsoft
released a compatibility pack so that the new file formats can be used
by older products. However, there are still a lot of people out there
who use Word 2003 or earlier and who haven't installed the pack. So if
you frequently exchange files with people using Word 2003 or earlier,
you might want to consider saving your documents in the old ".doc"
format. If not, ".docx" is the way to go.
Yves