"Contextual Spelling" is a new feature of Word 2007.
Contextual spelling allows you to have correctly spelled words highlighted when they are incorrectly used in a sentence. For example:
– They’re goes my hero.
– My friend spend two weeks in Colorado.
– I bought a pear of shoes.
– We’re loosing the game.
Note that all of these sentences have perfectly spelled words in them – they’re just incorrectly used.
Word 2007 can highlight these issues. It produces a blue squiggle under words just like red squiggles mean an "incorrectly spelled word" or a green squiggle means a "grammatically incorrect phrase".
Note that this feature is NOT turned on by default. To turn on:
–> Word Options | Proofing | Use Contextual Spelling (check box).
–> Word Options | Proofing | Use Contextual Spelling (check box).
There’s a full description of Contextual Spelling here at the Office Blog:
Kurt Shintaku's Blog 