Susan recently posted a great online doc collaboration URL on Twitter, and I thought that I would give my two cents on them, as well as link to one of the "do it yourself" solutions that I'm entertaining, OpenGoo.
Google docs is great for when you need something quick and dirty, and multiple people need to edit *and* see each others edits almost instantaneously, particularly in brainstorming sorts of scenarios.
Zoho, on the other hand, has better formatting options and has features that help crank out a more professional looking documents (e.g. table of contents, headers, etc that are very Word-ish). One interesting feature (annoying to some, perhaps) is that two people cannot edit the same paragraph at the same time. For major documention projects, this is not a big deal (and is maybe preferred), but for smaller brainstorming jamming sessions, it can be an eff'ing PiTA.
In the various consulting / VC circles I run with, we use Google Docs to, say, type up meeting notes and generate action items. As those types of documents begin to solidify, someone will often take ownership of the document and then move to Zoho to start making it look more professional. One very cool thing about Zoho is that it integrates with Google's login, so people do NOT have to create a separate account.
I do also use MS Live, but that is for really really big proposals with crazy formatting options that will get all squirrely with Zoho. It's ok if you are heavily invested in Word, but the lack of free storage is kind of a PiTA. I'm at a point now where I use these tools so much that I'm willing to blow a few days building my own infrastructure just so that I can have more control over my document base.
HTH!