Many users wanted translation feature in Microsoft Office for translating their documents. Now this feature is available, thanks to MS Research Machine Translation Team. The team has given the code to the Microsoft Office team for the integration of the translation tool directly in the Research Task Pane. Once the office team finish their own testing , this feature will auto-update in existing versions of Office.
But if you want it now, you can set it up manually following these steps. These steps applicable for Office 2007 only.
1) Click on the Review Tab
2a) Open the "Proofing" ribbon (if not already open)
2b) Select Research to open the research pane
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Source : Integrate Windows Live Translator into Microsoft Office