Working on one text document with multiple colleagues can lead to all sorts of complications.
Imagine writing a first draft and sending it out to several colleagues for feedback. You probably will receive several revised versions of that text document in return which contain annotations, comments and other feedback.
The difficult part begins when you need to combine the texts and make use of that feedback without loosing control. If you do that in Microsoft Word or any other desktop text editor you will most likely wind up with multiple documents opened in tabs or windows trying desperately to align them comfortably.
Text Flow is an online collaboration software using Adobe Flash and Adobe Air that allows the user to compare and display multiple versions of a document online. With Text Flow it is just a matter of dragging and dropping the documents into the interface to visualize all comments and changes made by other authors who worked with the document.
Check out the Text Flow online demo to see how the system works.
There are obviously other ways to handle the problem of receiving feedback from multiple colleagues. If time is not a issue you could make the colleagues work on one document only that gets send to each of them successively.
Other services like Google Docs offer basic collaboration features but they are not always allowed to use depending on the company you work for.
Update: Text Flow is no longer available, the website is returning a 404 not found error. Alternatives come in the form of cloud based document management and hosting services like Google Docs or Microsoft SkyDrive. Both services offer collaboration features that allow multiple users to work on the same document at the same time. While not desktop applications, they offer one of the best solutions available nowadays.