Indeed, it will be interesting to see how this works, since on with Google Docs the documents are not actually stored on Google Drive (just a placeholder/link that opens Google Docs when you open it). I would expect that this works there same, because so far there are no Google Docs file formats.

It should also be noted that Dropbox already had Office Online support for a while, which allows one to edit Office files that are stored in Dropbox in Office Online. This integration stores the actual Word/Excel/PowerPoint documents on Dropbox, so after syncing you have these files locally as well.