Microsoft recently rebranded its Office Web Apps as Office Online, and the free option is now prominently showcased. Microsoft definitely wants you to signup to its paid subscription plan, and that’s why many do not realise that there is a free plan.
Office Online is Office on the web, similar to using Pages/Numbers/Keynote at iCloud.com or Google Docs. It is free and you can only use the online version of Word, Excel, PowerPoint, OneNote and you can not save documents to your local computer. You need to subscribe to the $9.99 per month Office 365 Home Premium plan if you want a local installed copy of MS Office, access Office on your smartphone and offline storage. If you have no other choice but to use MS Office, checkout the various available MS Office options.