Why does Microsoft Word need to allow incoming network connections? When I turn on the Mac firewall I get prompted to allow the MS office apps (Word, Excel, Powerpoint) to accept incoming connections. Why is this, and is it safe to allow it ?

I'm running Mac OS 10.7.2
I can't speak for Office 2011 because it requires you to activate your serial number with Microsoft, but in Office 2008, Office 2004 and Offive v.X, the incoming network connection is part of Microsoft's anti-piracy efforts.  Since each copy of Office is activated with a unique product key, Office products open an incoming network connection and listen for connections from other instances of Microsoft Office on the network.  When connections are established, the two instances of Office will trade product keys and make sure they are not the same.  If they are the same, then one user is forced to close their copy of Office.

I recommend instructing your firewall NOT to allow Office to accept inbound network connections.

Here's a link to Macworld that speaks about this 'feature':

http://hints.macworld.com/article.php?story=20020406142423494