"The Cloud" refers to file storage on the internet, rather than on your own "local" computer system.
Google Documents is a "Cloud Computing" suite of applications made available by Google where the APPLICATIONS also reside on the internet.

The applications available include
  • Word Processing
  • Spreadsheets
  • Presentations

Advantages
  • Universal accessibility for YOU means convenience
  • Efficient and effective collaboration and web publishing
  • Google maintains and backs up it's servers - likely with greater ability than you or I could
  • Files CAN be "exported" back to your own local computer as Word, Excel or PPT files
  • Revertability - ultimate backup system
  • Consolidation and centralization of documents - no risk of multiple versions
Disadvantages
  • Dependance on an Internet connection
  • Potential exposure to malicious users (hackers)
  • Potential lack of privacy
    • Sharing control & understanding
    • The Patriot Act

Chances are, many of you already use "Cloud Computing";
if you use Hotmail or GMail, your email is already being stored in the Cloud.