Office File Validation is a feature to validate Publisher’s PUB files. It verifies that a binary file conforms to application’s expectations. Office 2010 expanded this feature significantly to include binary formats for Word, Excel, and PowerPoint. Please note this feature's only for binary formats (PUB, DOC, XLS, PPT, etc), this doesn’t validate XML based documents (DOCX, XLSX, PPTX, etc), nor does it validate macros or other custom items. It does validate the structure of file, for e.g. if you’ve a XLS file that has a FONTINDEX structure with the ifnt value set to 4 (which’s an invalid value for that particular item) then it fails validation. Whenever an un-trusted binary file (not in a trusted location and not a trusted document) is loaded it goes through a check to see if its a valid file. This check looks at specific bits of file that app is about to parse, in other words relevant OLESS Streams. If its determined to be valid, it opens as normal, nothing to see…move along…move along. However if its found to be invalid, its sent to Protected View.
Full Article: Office 2010 blog