Birthday iPad



So upon arriving home I found a lovely birthday present from my parents waiting for me, the shiny new iPad upon which I type this now. Though I stand by my previously made statement that it is basically a novelty, an oversized iPhone that doesn't make calls, I am actually really enjoying it and think it will serve my computing purposes well. I'm sure that only reveals just how technologically unsophisticated I really am, but no matter, I am happy. Thanks, Mom and Dad, for the lovely and generous gift (even though you probably should have considered my gift paying to get my car fixed.)

Can anyone recommend a good word processing application for it? I plan to primary use this thing for Internet and for some light writing on the go, and since none of the word processors for iPad I've seen are free, I would like to know which is good before I purchase. I would like it to be compatible with the .docx format so that I can import any files generated here into MS Word on my desktop. Any other app recommendations are welcome as well.