My roommate just had this problem with Microsoft Word 2003, and I found the fix using the Google search engine. Here’s what you do:
Tools -> Options -> Edit
Check “Typing Replaces Selection”
That’s all my roommate had to do. For the sake of completeness, the fix also says:
Tools -> Options -> General
Uncheck both options that have WordPerfect in them
Hope this helps someone.

Thanks!
That was a real frustrating couple days!
this problem randomly started on my office pc one day then spread to my own machine when i emailed docs home!
thanks for the easy fix.
Thank you very much for a concise and helpful post! Don’t know how I managed to uncheck that option, but your explanation saved me quite the headache.
Take good care.
Thanks! I’m an IT professional, and I still didn’t know how to do this. I just hate the fact that there are so many hidden options like this in MS word (when I say hidden, I mean they are there, but you just have no idea where to find it cause it’s not intuitive).
Cheers.
Thanks, was having this problem and just googled it. Yours was the first result displayed …. and it worked