On March 24th, we introduced new features to WordPress.com, described in this post: http://en.blog.wordpress.com/2014/03/25/editor-playlists-improvements/
As part of this change, the post editor will get the ability to drag images right in to it and have them upload. You can also resize images right in your editor window.
We have also removed the "Paste as (Microsoft) Word" button from the Visual Editor toolbar in your post/page editor window. Most of the time, you should now be able to paste text from Word and other pre-formatted text without an issue. If you still need a plain-text paste option, you can use the "Paste as Text" button (the upper case T).
For more information on using Microsoft Word (or other word processors) with WordPress, see: http://en.support.wordpress.com/microsoft-word/
We have also renamed the 'Kitchen Sink' option to expand your toolbar options to 'Toolbar Toggle'.