The steps following shows how to set & remove password for word document.
Set password for Word 2007 document:
1) Open the document.
2) Click File-> Prepare -> Encrypt document
3) Enter your password
4)Re-Type password
5) Now save (ctrl+s) your file.
If anyone try to open file, it ask password
If password correct, it display content of file.
Remove password for Word 2007 document:
1) Click File-> Prepare -> Encrypt document
2) Erase entered password and click O.K button.
Now your password is removed.