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The free service, which is currently in its beta phase, will be open to anybody with a Windows Live ID and will allow users to store Word documents, Excel Spreadsheets and PowerPoint presentations online.

However, if users want to create a new document or edit the text, they must have an installed copy of Microsoft Office.

Workspace will give users around 250MB of storage, enough for around 1,000 average

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Office documents in the OOXML format. Users will also have the facility to invite others to read and add comments to those documents through the browser.

The site says that customers will be able to upload Word, Excel, PowerPoint files and PDFs, as well as save and open documents directly through Office 2003 and 2007.

Microsoft says Workspace may eventually become advertising supported and offer "additional features or services at a charge," though it did not offer further details.

Workspace arrives amid a flurry of activity in online office suites. Adobe announced today that it will be launching its own online word processor, while IBM recently launched its Lotus Symphony suite.

Microsoft has also announced plans to deliver software as a service to its corporate customers.