bnt:
Your correct in that MS did not invent it, we used a similar service back in the NT 3.51 days which I cant recall the name but get an inkling it was something called dragon or similar (It was when I was working for Sony R&D about 15 years ago on a newsroom system).
I will have to dig out my notes for my masters (a few years ago) where we looked into different file systems and how shadow copying worked - but IIRC when MS bought the technology they included it in at a Kernel level so that you did not have to close the files - again I could be wrong but will try dig out my books tomorrow.
With regard to Office products they will only lock the files for the duration of the write - however if two or more people open the same file then it is defaulted to read only mode - I believe in the options for the various applications you can specify a permanent lock when open (textpad also has a similar config option).
I think the key thing which we have both pointed out is that unless you are using a shadow copy aware backup application there is no benefit in utilising the features of shadow copy and indeed it just adds uneccessary overhead.