A while back, I made a podcast (which seems to have disappeared) about how I thought Google docs weren't quite ready for the education sphere. For some projects, that's still true. If you need footnotes or even a lot of endnotes, Google docs won't make that easy for you. But if, like me, most of what you write is devoid of special formatting, Google docs is great. I've written memos, letters of recommendation, resumes, and more. By far, the best thing about Google docs is the collaboration features. I'm able to work with people across the country easily, thanks to Google docs. There's no waiting for someone do make changes and email them to you. If you want to jump in and add something--even at the same time as someone else--you can. I've used this with my student workers as well. I'll start a help document, point them to the url and have them add to it.
I recently did a presentation in Google docs. It worked really well and I really like the chat feature, which I wish they'd add to the document area. I like the way your presentation quickly becomes a url and an embeddable presentation. With PowerPoint, there are too many steps to get to that point.
I also started using the spreadsheet function for a large data collecting project that I was working on with someone. It just wouldn't have been practical to pass a spreadsheet back and forth via email or to work on spreadsheets separately. We needed to know who had done what at any given moment. The coolest feature they added to spreadsheets was forms. I've used those a lot. I'm having my students fill out information about work they've done via a Google form. I've used them for workshop sign ups and I'm using one right now to decide when to hold a workshop. It's much faster than coding up your own web form. All the data is neatly organized into a spreadsheet.
And all the documents can be saved in standard formats--pdf, doc, ppt, xls, txt, html. And I'd recommend doing that every once in a while. Google may claim their motto is "Don't be evil" but that doesn't mean that mistakes might not happen (I've seen them on the Internets).
I love that Google docs is simple and straightforward. It doesn't take forever to load and you can just do the basics without too much thought. Also, if I'm unable to get to my computer, I can still get to my documents. Now that I've gone to a laptop, this doesn't happen too often, but I have been in meetings or in a lab where it would be a pain to go get my laptop.
Now, I'll be fair, not everyone thinks Google docs is the best thing since sliced bread. But instead of shelling out money for Microsoft Office in order to get the advanced features, get OpenOffice. But read the original post and comments. There's a good debate there.