Proprietary document formats have earned Microsoft and other companies lots of money for a long time, and still do. Open document formats could be called the opposites of those formats.
An open document format is well defined, non-secret and for anyone to use. That means any company can get the specification of the format and write an application that can read the format and save documents in that format. It doesn't necessarily mean the format may be used without license payments, but sometimes it does.
Proprietary formats are an effective way of locking-in customers. Let's say you have used a very nice application to create lots of documents in a certain format owned by company A. Now you hear of an application from company B, which allows you to create even nicer documents and is so much easier to handle. It also costs much less. You consider buying the new application, but there's a big problem. All those documents you created with the application from company A can't be used by the application from company B. Company A have also updated their application, but it's not quite what you want and they want you to pay for an upgrade. This is a lock-in example.
Open document formats prevent lock-in. They make it possible for the user to choose the application that's best suited for his needs and share the output with others who may be using other applications. The OpenDocument format (ODF) was accepted as a standard by OASIS in May 2005, and by ISO in November 2006, as standard ISO/IEC 26300:2006. OASIS is an organization of companies, i.e. a consortium. ISO is a standardization organization.
Governments and companies who now spend fortunes on applications with lock-in are the greatest beneficiaries of open document formats. The EU has for several years recommended the use of open document formats and the idea is spreading. ODF is mandatory standard for all documents created within NATO.
There are great benefits for everyone in standardized formats. Just think of the JPEG picture format, which is used almost everywhere. You can take pictures with any camera or you can make pictures in Photoshop and save them as JPEGs and view them on any computer or smartphone.
There are winners and losers when things are standardized. The losers are companies who own the formats. Everyone else is the winner. Losers don't have to lose everything though, because often they can still charge others for the use of their formats.