I must point out that TextEdit is a very good word processor and it's part of OS X so you don't have to pay extra for it. People overlook TextEdit too often.
If you need more features or you need a complete office suite, then it's AppleWorks or Office.
The 2 strikes against AppleWorks are the interface and compatibility. It's easy to use and has good features, but it looks old. That's completely superficial and has nothing to do with the way it works, but we've gotten so spoiled with the iApps that AppleWorks looks out of place and it turns some people off. Compatibility is a bigger, and more real, problem. If you have to share documents with people using Office you'll lose some formatting in word processor documents and spreadsheets are a disaster. If you're just making things to live on your own computer, then AppleWorks is great.
MS Office--The question, imo, is how much do you hate Microsoft? They dominate the office suite genre and really have us by the balls. The software has the typical bloat, but it works so it's just an ethical decision. I'm a huge MS hater but I still, unfortunately, use Office. I need to share documents with the rest of the world too much.
I use OpenOffice on Linux and it's the greatest thing since sliced bread. The Windows version is great too. Unfortunately the Mac version isn't quite there yet. Maybe soon...