Excel and Word support many file formats, from binary files to XML based formats. The simplest for the Views data export module to create is a HTML table in a file. Excel and Word can open these files, though it may do so with a warning about the old file format, it is a perfectly valid XLS/DOC file format.
Many people will want Views data export to produce a more modern XLS or DOC format, this will not be supported in the core of the module, as integrating with one of the PHP extensions is complex. Others are welcome to extend the Views data export module by providing a Views style plugin that uses one of the PHP extensions.