I believe that's part of their magic trick. I don't think as many people would rush to think it's the official MS Word if it cost only $1.

The price, app size, screenshots. Everything is misleading, except the one thing most people don't even look at, which is the text description.

Yeah, they deliberately made the in-app interface look like a mobile word processor. Which is really, really deceitful.

I only have very specific first-hand knowledge, but Android's OneNote application is free, released by Microsoft. If you think about it you'll likely come to the conclusion that Word wouldn't be free, but at first blush I'd believe it.