How and Why to Convert a MS Word Document from Compatibility Mode to Normal Mode

Sometimes MS Word will display the “Compatibility Mode” message right after the file name on the Title Bar:

That means you have opened a file saved in an earlier version of MS Word in a newer version of MS Word. For example, if you open a file saved as a MS Word 2003 file in MS Word 2007 you will get that “Compatibility Mode” warning.
For example, if you’d like to track changes in Compatibility Mode, you may getting the following warning message:

You can covert a file to the newer version (for example, from a .doc format to .docx format) by selecting the Office Button (in MS Word 2007) then clicking the Convert button. However, by doing so you may have difficulty editing certain parts of your document, like tables. Be prepared for such editing issues when you convert a document to a newer version of MS Word.
Compatibility Mode limits your editing capabilities. For example many types of text are converted into static text in Compatibility Mode — you cannot edit them anymore.
Here is a list of behavior allowed in the Compatibility Mode for MS Word 2007:

Office Word 2007 element	Behavior in Compatibility Mode
Heading and body fonts	Converted to static formatting.
Relative text boxes	Converted to absolute positions.
Margins	Converted to absolute tabs.
Bibliography	Converted to static text.
Citations	Converted to static text.
Placeholder text in citations	Converted to static text.
Placeholder text in content controls	Converted to static text.
Themes	Permanently converted to styles. If the file is later opened in Office Word 2007, you cannot automatically change the style by using themes.
Theme colors	Permanently converted to styles. If the file is later opened in Office Word 2007, you cannot automatically change the style by using theme colors.
Theme fonts	Permanently converted to styles. If the file is later opened in Office Word 2007, you cannot automatically change the style by using theme fonts.
Theme effects	Permanently converted to styles. If the file is later opened in Office Word 2007, you cannot automatically change the style by using theme effects.
Content controls	Permanently converted to static text.