How can I compare different versions of Word document in Sharepoint?

Sharepoint is pretty interesting to use on an enterprise level. More and more companies are adopting the Sharepoint way to share and collaborate documents and to do their Knowledge Management. If you are used to using Sharepoint, I am sure you have used it to upload your word document and share it across the team. 

 
Most commonly a development team would have its own MOSS site where it can upload their documents. In a MOSS site you can check out a Word document and make changes and Check In just as you can do in TFS. So in this case Sharepoint does keep a version history of all the changes made to the word document, but if you want to compare different version of the document, you do not have an option in Sharepoint to do it. But don’t worry, if you are using Word 2007, Word itself provides a feature to do the Word Diff Comparison.  
 
Note: This feature is available only in Word 2007.
 
To do the Word Document comparison in Word 2007:
1.       Goto the Review Tab in your Word Ribbon
2.       Click on the Compare Icon
 
This will give you different options to compare the different versions of the Word document in Sharepoint.  This option retrieves the Word document Version history from sharepoint and allows you to compare the versions. It gives you a side by side view to compare different versions of the document.