Stephen Bonner, head of security for retail at Barclays gave a very good presentation at the London B-Sides conference on how to pass the hiring challenges and a good section of his talk was around why recruitment agents equate to a man-in-the-middle attack. Their main aim is not necessarily to get you the best job; it is for them to get the most referral fees (huge generalisation, obviously, but a useful thing to remember)

The two main reasons for Word docs (given with examples of evidence which I won't copy here):

So recruiter can remove personal info so all comms go through them (so they make sure they get their fee)
So recruiter can add info so your CV is a better match to the job spec (yes, really - even adding skills you never knew you had)