If you mean Microsoft Reader .LIT books the PRS300 can't read them at all. The main formats readable on the PRS300 are EPUB, LRF, DOC, RTF, and PDF. To view LIT files you will have to strip away the DRM (digital rights management) and then convert them to another format. If you mean Microsoft DOC and RTF then the PRS300 does a good job with them, or at least the RTFs. I've never tried the DOC format, but it should work fine.

PDFs are not that great on any small screen reader especially if they have multiple columns and/or a lot of tables and charts. Text only PDFs are generally okay though as long as they are not bitmapped images rather than reflowable text.