Presumably, this will also allow document editing from mobile devices too - copy/paste has to come though.
I'm not personally keen on web-based software but I use web-based email every day and have done for the past few years without a problem.
Email is a bit different because you don't really have to deal with images and the file sizes aren't very large. Dealing with a 10MB+ document over the web is not something I'd like.
Google have realised this and added to their web-based document suite with Google Gears, allowing better performance. I think it just syncs and caches data to speed things up and probably allow offline editing.
Apple have already added a database cache to Safari in a recent version and I wasn't sure what it was for. This could put it to good use. It defaults to 5MB and although that doesn't seem like a lot, it actually holds a decent amount of plain text data and markup.
Pages documents are just gzipped XML. This can be loaded into a non-relational database. If there are no image changes, all the editor has to do is store the changes to the text in the offline database and do a very minimal database sync with the server. Images can be uploaded in the background and possibly downsampled if they are too big.
Google Gears currently doesn't support Safari but Apple could make their iwork software Safari-only.
The online service Apple can offer may not be online-only software but an alternative to the offline suite with a lower cost.
Collaborative editing can also be a feature.
I'm not against the idea, it has clear advantages so I'll wait and see how they've implemented it. The more and more business management systems I see like CRM tools etc, they seem to be moving more towards being web-based. Adobe offers a web service too:https://www.photoshop.com/express/landing.html
Software As A Service business models are gaining ground the faster and more prolific networks are getting. IMO, the main thing holding them back are the limitations of relational databases, which don't easily map complex data structures onto them in a time or performance efficient way.