Windows: restore previous version of a file; this works.

I knew that windows stores older files  versions whatever this means and whatever this works.
But today I used this feature first time. Ever. By mistake I overwrote one important file. And... I have restored original version of it. 
But still, I do not clearly understand how this works and I would not rely on this feature. If you really need keep change history - you need a version control system.

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