Overall, I'd say iWork is a good buy. Inevitably, you'll have a few compatibility issues, particularly when you incorporate more advanced formatting, but if you don't mind playing around for a while, you'll always be able to resolve your problems. That said, I would say that the three components differ in quality.
Pages is a little weaker than Microsoft Word, and it can take some getting used to if you come from a Word environment; however, I use it every day for all of my word-processing needs. It also has a few nice features that Microsoft Word is lacking, and I personally like the Inspector interface. On the whole, it can do just about everything Word can do, and it's an effective substitute.
Keynote is absolutely superior to PowerPoint. It's easier to use, and it gives you more control over your presentation. Keynote includes the ability to export its files easily to Quicktime, PowerPoint, Flash, HTML, or even a special iPod format. This means that you can show a Keynote file on just about anything, making it more "compatible" than PowerPoint.
Numbers is not nearly as good as Excel. Excel is the reason I own MS Office, and if you really know how to use it, there is no competitor, but most people don't use the full power of Excel. If you just need a basic number-crunching and spreadsheet program with some essential formulas, then Numbers will do just fine.
So, my final rating is that out of the three components: iWork holds the clear lead in one (Keynote), Office holds the clear lead in one (Excel), and one is about equal with a slight advantage to Office (Pages vs. Word). If you really need Excel or you don't want to learn a new suite of programs, but Office. If you want the true Mac experience and a gorgeous presentation program (as well as free technical support if you have AppleCare), then go iWork.