Google now allows you to "convert files already uploaded to your documents list into a Google Docs format. Previously, this option was only available on upload. This addition includes converting image and PDF files to text using recently added " Optical Character Recognition (OCR)" technology," informs Google.
The full list of files that can be converted include:
For spreadsheets: .xls, .xlsx, .ods, .csv, .tsv, .txt, .tsb
For documents: .doc, .docx, .html, plain text (.txt), .rtf
For presentations: .ppt, .pps
For OCR: .jpg, .gif, .png, .pdf
To convert your file, right-click on it while in the document list and select Make a Google Docs copy. This option leaves your original file in place and adds a new Google Docs copy to your docs list.