It's like the word unconference. It was a term we came up with for BloggerCon, and then was applied to a very different kind of conference and the result was confusion. That's what outlining in word processors was, from my point of view, confusion.
What they called outlining was more like outline formatting. Putting Roman numerals on the top sections, capital letters on the first level. Numbers on the second and so on.
Word is a word processor. Its primary function is writing-for-printing. The choices the designers made make it a relatively strong formatter and a weak organizer.
Conversely, we can put formatting capabilities into an outliner, but it would behave like an outliner, not a word processor. We fully explored this with MORE, the users loved it, but they still needed to export to Word or Pagemaker if print formatting was important.
Word is a production tool -- good for annual reports, formal papers, stories, books. Fargo is an organizing tool, good for lists, project plans, narrating your work, presentations, team communication. You could organize a conference with an outliner. The slides would naturally be composed wiht an outliner.
An outliner is designed for editing structure more than it is for editing text. The text is sort of "along for the ride." Or you could see an outliner as text-on-rails. Outliner text is always ready to move, with a single mouse gesture or keystroke. You enter text into an outliner so you can move it around, like stick-up notes on a whiteboard.
The reason a program has to be either a word processor or an outliner is this: There's only one keyboard, and one set of mouse gestures. The identity of a product is determined by choices made by the designer. Word processors are good at selecting words, sentences and paragraphs. Outliners select headlines and all their subs. Shift-click in the two apps do vastly different things, yet in both cases they are "extending the selection." Even the data structures used by the programs are different. Yet superficially they look similar.
Apple's iTunes is another good example. It's all over the map, doing a dozen different things, without a single idea tying it all together. You can tell that the designers are confused too, because in each rev the commands move around and are re-named. Things you depend on disappear, but if you know the magic formula you can make them reappear. One senses that it might be possible to do a beautiful music app that felt wonderful, but if Apple were to produce one, they'd have to start over.
People who used an outliner were never satisfied with what the word processors called outlining. Ultimately that's how you tell what you got. When you sit a person down in front of the keyboard, does magic happen?
BTW, this is great. When I was selling outliners in the 80s there were no blogs, so I couldn't comment on how the various categories of software were handled by reviewers. Now the conversation can be multi-dimensional and lots of learning can happen quickly. Hope! :-)