You are prompted to download and save these documents.  After a bit of trolling the internet, I found the link below.  Apparently it is a Central Administration setting.  To resolve the issue we need to set Browser Handling to Permissive.

1. Open Central Administration
2. Click “Manage Web Applications” under “Application Management”
3. Highlight the web application experiencing the issue and click “General Settings”
4. Scroll down until you see the “Browser File Handling” settings, toggle the radio button from “strict” to “permissive”
5. Click “OK” and you are all set!

Solution from: http://social.technet.microsoft.com/Forums/en-US/sharepoint2010setup/thread/09bf83d9-8aa1-47f0-a3ff-d7d2b64ea0a4

SP2010 has restrictions on displaying or opening some files. So for that, You need to go to central administration and check the “Browser File Handling” to “Permissive” for that web application’s general settings.

Additional resources: http://technet.microsoft.com/en-us/library/cc262107.aspx