In many ways, Apple forced Microsoft's hands on this one - and the story is not too different from what happened with Google Maps.
Google was giving the step motherly treatment to iOS, keeping back crucial features like Turn-by-turn, StreetView, etc. After Apple released their own Maps, the story changed - Google faced the risk that the sheer volume of iOS users would help Apple improve Maps, both in terms of accuracy and features. They promptly released an App in the AppStore for Maps!
The story with Microsoft is going to be exactly the same. As every new device from Apple comes preloaded with iWork for free, this gives iWork a massive installed base. Remember, including the iPad, Apple is the largest PC maker on the planet, and counts about 20% of PCs sold. This 20% gets iWork for free. Soon Office will be irrelevant.
The reason why iWork will work, while alternatives like Open Office, etc may not, is that Apple gives a lot of importance to usability, even if it means compromised featureset. This attracts people, and makes it easier for everyone to get familiar.
MS has a very small window here. Any further delay, and it might completely destroy their Office monopoly. Office is unquestionably better, but for almost 80% of people, iWork is "good enough"!
In many ways, this is a reverse of how the OS wars played out. Mac OS is unquestionably better than Windows, but for most people, Windows was good enough!
People are not giving enough value to Apple's software edge. Running the largest AppStore, with better quality apps, better monetization, low piracy, etc, gives Apple a humongous edge even against a player like Microsoft.
And if Apple is smart, they will soon release a version of XCode with support for compiling apps for Windows. This will run only on the Mac obviously, and the code will be native Objective-C. The exact same code can be used to create Windows binaries. Apple already has such a concept internally, and it is capable of handling sophisticated products like iTunes and Safari. And Apple is the biggest contributor to CLANG and LLVM projects, so if anyone can do this, Apple can.
Creating a native cross platform code, will make Apple the choice of all developers, and will give iOS and Mac OSX the best software and the earliest software. And since this software would be designed from the ground up to be running on Apple hardware, the performance and look on Apple hardware will be best, while still offering a reasonable option on Windows.