iCloud document sync works for applications that support it. Which doesn't (yet?) include MS Office,
AFAIK.
I think you will have to use a 3rd party sync application to synchronize MS Office documents across iPhone/iPad/iMac. I've heard good things about SugarSync, but not tried it myself.
More broadly -
Apple is trying to get away from the traditional approach of treating files and folders and applications as separate things that the user has to manually manage.
In the traditional (computer) realm, the user creates a hierarchical folder structure, chooses where to store various files in those folders and subfolders, opens an application and navigates to a particular folder, subfolder, then file, and opens that file. In the new (smartphone) world, the user opens an application and opens the desired file created in that application, finding it with an unstructured search (like searching the web) rather than by navigating a folder structure, in fact as far as the user knows there is no visible folder structure - everything is "flat".
Not sure which approach I prefer. I'd say the "computer" approach is better for advanced, organized users dealing with a lot of files - power users. I think the "smartphone" approach is better for casual users. Over the years, the Windows and Mac OS'es made the "computer" approach fairly accessible to casual users, mostly by creating a default folder structure ("MyDocuments" etc), automatically assigning particular applications to particular file types, and including auto-indexing/search. The iOS and Android OS'es have a ways to go to make the "smartphone" approach suitable for power users, but they have just started and since unstructured search techniques are powerful enough to handle the whole internet, it can clearly handle the output of a single user.
Anyway, iCloud document sync works in the context of the smartphone approach. If the application supports iCloud sync (the API is available to all) then when you open the application on a device - iPhone, iPad, Mac - all the documents you created with the application on any of your device are automatically available on all of your devices. The problem currently is that not that many applications support iCloud sync. iCloud document sync isn't intended to work in the context of the computer approach - you can't point to an arbitrary file or subfolder and say "I want this mirrored across all my devices". I doubt that will ever be enabled, it doesn't really make sense in a smartphone world.
Another option, BTW, is to use GoogleDocs, access documents that live in the cloud via a web-based application. That is how my high school daughter and her friends do it. They hardly use MS Office and wouldn't even understand what you meant by synchronizing local file copies across devices.