What about diagrams that you created in earlier versions of PowerPoint? What can you do with those in PowerPoint 2007? The picture shows a message box with a couple of options that you have.
Here's the background: When you first open a diagram, such as an org chart, that you created in PowerPoint 2003 or earlier, the diagram isn't editable.
When you double-click the diagram, the Diagram Conversion dialog box appears. It offers two options:
The first option is to convert the diagram to a SmartArt graphic. The conversion applies an appropriate layout, a default style, and colors from the current theme, which you can change as you like. The converted diagram has available to it all the design and formatting tools of any SmartArt graphic.
Note that this process may significantly transform the look of the diagram, and if it has an animation applied to it, this might not play exactly as expected.
The second option is to convert the diagram into shapes that you can format. If you want to maintain absolute fidelity to the diagram's original look and behavior, you'll prefer this choice.
After you convert a diagram into shapes, you can use all the formatting options available to any shape in PowerPoint (these are part of Drawing Tools, which apply to shapes and placeholders, and are not part of SmartArt Tools).
For more details about each choice, read the notes here.
Converting to SmartArt graphic Once converted, if this diagram is opened in an earlier version of PowerPoint, it won't be editable as a diagram, but will instead open as a picture.
If you make no significant changes to it and then reopen it in PowerPoint 2007, it will be editable as usual, as a SmartArt graphic.
You can use this conversion feature for diagrams as old as PowerPoint 2000.
Converting to editable shapes If you convert the diagram to shapes, it isn't updated to use a SmartArt graphic layout and style, or exact colors from the theme, and none of the galleries on the Design tab in SmartArt Tools are available.
Significantly, this choice means that the diagram is editable by someone opening it up in PowerPoint 2003 or earlier.