XML more compressed than MS Office binary format?

An interesting tidbit from an interview on the new "Ribbon" interface in Office 2007:

One likely incentive for that migration will be reduced storage costs. Microsoft claims that file sizes for the new Office 2007 XML-based formats are up to 75 percent less than existing Office formats.

How can Microsoft have been so inefficient with the previous Office binary formats? Or will the new XML formats be impossible for humans to read?