Edit custom dictionary

The default dictionary where you store your own words in is in a file called CUSTOM.DIC. You can edit it from within Outlook or by directly opening it in Notepad.

Outlook 2007
Tools-> Options…-> tab Mail Format-> button Editor Options…-> section: Proofing-> button Custom Dictionaries…-> button Edit Word List…

Outlook 2003 and previous
Tools-> Options-> tab Spelling-> section: Edit custom dictionary-> button Edit…

By default the CUSTOM.DIC file is kept in a folder called UProof (for Outlook 2007) or Proof (for Outlook 2003 and previous) and can be found in the following location;
Windows Vista: C:\Users\%username%\AppData\Roaming\Microsoft\
Windows XP: C:\Documents and Settings\Robert\Application Data\Microsoft\

Note 1: The name of the folder is different because for Outlook/Office 2007 the CUSTOM.DIC file is saved in Unicode where the previous versions of Outlook/Office used the ANSI format. The U in UProof stands for Unicode.

Note 2: if you are in an organization, your network administrator can choose to deploy a CUSTOM.DIC file which for instance already includes some words which are not in any default dictionary such as the company name and internal abbreviations.