It's very simple to use. Just go to the Review tab* and click on the top half of the Track Changes button. As long as this button is selected, all changes will be tracked and noted within the document. How the changes show on the screen will depend on your settings.
More options are available by clicking the bottom half of the Track Changes button. Click Change User Name to change the name that shows up as the author of all your documents and as the author of any comments you add to a document. (We'll cover comments next week.) To adjust your settings, select Change Tracking Options.
That brings up this screen and you can make changes according to your preferences. These settings are specific to your computer and will only affect the way the Track Changes appear to you.
I hope this was helpful to some of you. If you have any questions or if my explanation was confusing, please let me know in the comments. And if there's anything specific you'd like me to cover, please let me know. I'm open to any suggestions. :)
More Word tips posts here.
*Microsoft Word 2007
Update: In the comments, Sarah Ahiers (Falen) asked, Do you know how to change tracking options on Word 2003?
I've never used Word 2003, but I found this awesome pdf that should help anyone using that version. :)
For more info on using Track Changes and for how to add Comments to your documents, check out this post.