Let's start with Windows 8, Windows 8 is Microsofts new operating system, currently slated for release in August/September of 2012 (though I'm betting they'll push for August to try and sell some laptops for college kids). Along with Windows 8 will come Windows RT, which is the version of Windows 8 written for the ARM processor (which is what most of the current mobile devices use) and Microsoft has announced that Windows RT will ship with Office on board. Microsoft could do very well in the business market, they are maintaining their lead in the business desktop, but have become a non-player with business mobile. With Windows RT they will pull back some of the mobile lead that Apple currently has in this market.
Microsoft has always seen the importance of building Office versions for Apple's operating systems. For starters if it wasn't for Apple Microsoft wouldn't have succeeded (they would have been broken up by the Justice Department) and vice versa if it wasn't for Microsoft Apple would never have gotten the infusion of cash that was needed to keep the lights on. This odd symbiotic relationship between two tech powerhouses is something that is something that many look over, they see them as hating each other, when in fact they get along like a brother and sister (it's a love hate thing). If they both have a common enemy right now, it would be Google, in all the patent litigation, you don't see Apple and Microsoft going after each other, instead you see both going after Android/Google.
With the number of iPads in business, combined with the number of Microsoft "clones" available on the iPad, it would make sense that Microsoft would try to protect it's brand and build an iPad version of office. As a side note, the Microsoft "clones" that I've seen on the iPad that are decent, only two stand out. CloudOn (requires a cloud connection and can be tough to use) and DocsToGo (which is easy to use, but doesn't maintain document formatting). Let's face it, Microsoft is the current standard in professional office tools, if they want to protect that lead, they need to produce tools that work on the most popular devices.
How could Microsoft mess it up? Simply to not release a version of Office for anything but Microsoft RT, this is an option, but it's an option that would allow a clone to come in and steal their business. They could also mess it up by releasing a cloud based version of Office, a version that requires a web connection. This would mean that you couldn't edit documents while flying. In the end though, we should be seeing a copy of Office on the iPad within a year.