With Office 2016, Microsoft introduced a new, highly useful collaboration feature in Word: Co-editing (or co-authoring), which allows multiple people to work on a document at the same time. Co-editing is a great timesaver. Instead of having to email documents back and forth and wait for the other person to make edits to the file before you can jump back in, more than one person can edit the Word document simultaneously. You'll also be able to see how someone else is editing the document character by character--all from the desktop program rather than having to rely on the less feature-rich web version of Office (or Google Docs, which also has this feature).
To enter this collaboration mode in Word, you'll need to save the document to OneDrive, OneDrive for Business, or a SharePoint Online location rather than a local folder. People you share the document with can view or edit the file using either the free Word Online app or Word 2016. (If they're using other versions of Word--Word 2010, Word 2013, or Word for Mac 2011, they can still edit the shared document, but you won't get the real-time collaboration and changes will only be shown to everyone after the file is saved.)
1. Save your Word document to OneDrive or a SharePoint Online.
2. Click the Share button in Word and then enter one or more email addresses of people you want to share with.
4. Set their permissions to "Can edit" (selected by default).
5. Add a message if you like, and for "Automatically share changes" choose "Always".
The "Always" option means that others will see your changes in real-time as you make them. If you or your co-authors choose "Ask me," you'll be prompt to automatically share changes when the document is opened.
Choose "Yes" for real-time co-editing.
6. Click Share.
7. Optional: Change the sharing options for all shared Word docs. Your choice for automatically sharing changes affects Word overall, not just the specific document you're working on. If you don't want that to be the default for all documents you share, go to File > Options and under the General tab, change the drop-down selection.
8. Edit the document with others in real-time. When the people you invited follow the link you sent them, the document will open in their version of Word or, if they don't have the desktop program installed, Word Online. If they've agreed to automatically share changes, you'll see their edits as they happen. You'll also see when they enter or leave the document.
How does Word handle collisions, you ask? When you start to change text, Word will lock that area to prevent anyone from overwriting your changes. It works on a first-come, first-serve basis. If, however, you and someone else start changing the same text at the same exact time (or they edit that part without real-time changes turned on, e.g., when they're offline), Word will show the conflicts the next time you save and you can choose which to keep.
I found the co-editing feature in Word 2016 to be a bit slower and more laggy than the co-editing in Word Online and Google Docs, but it's still nice to have the full features of the desktop version of Word--while working on documents with others simultaneously.