Apple's iWorks apps, including Pages, will import and export to .doc file format. As long as you are only doing it once, or twice, and the formating isn't overly complicated it does an excellent job. You won't find a better, more feature rich, word processor on the iPad. At least not yet.
If you need to maintain better compatibility with Word and/or will be moving the document between the iPad and Word often, then you may want to try some of the other Office compatible options. They are not as feature rich as Pages, but they don't change the format so there is less chance of conversion errors.
Some of the most often mentioned on the the site are:
Office HD
QuickOffice
Documents to Go
hopTo is a more recent app, and has been getting some pretty good reviews, both in the App Store and in the tech media. It's free, at least for now, so you might want to give it a try.
If you don't want or need a full word processor, then there are a multitude of text editors out there. For a wide range of formats (txt, rtf, html, markdown) and a good feature set I recommend Textilus. It supports DropBox for importing and exporting files, making it easy to share the documents with just about any computer (provided you have internet access).
There are many other great text editors. Textilus just happens to be the one that I have that sounds closest to what you want.
Good luck.