Re: I don't get it
"Disk is cheap. CPU is cheap. RAM is cheap. LAN is cheap.
But external bandwidth is (in comparison) quite expensive."
But MS Office is also quite expensive.
However, it all depends how MS price their online service. If it is cheaper than buying the full product, especially if you can write documents on any PC without having to buy a licence for each one, then it's attractive.
Not as attractive as Google's offering though which is free (though somewhat limited in features).
Personally, for the desktop office experience though, OpenOffice is by far the best around. It's free and does 99.9% of what most users need (ignoring Outlook, but then there's Thunberbird, also free).
Tie up OpenOffice with Google's online service and you've got document editing wherever you like, for free (not counting bandwidth costs).
Oh, and also online services enable netbooks and other low-spec devices (smartphones even, including the iPhone), to have an Office suite without needing the power and memory to install MS Office or even OpenOffice.
The downside is the reliance on a net connection, but you can have data and the app cached locally (see Google Gears), and on the other hand is it safer to have your data spread around a cloud network amongst highly available and failoverable servers, than sat on your hard disc at home waiting for your PC to crash and burn, get infected with a virus, or your house to burn down?