Windows Shadow Copy Backup and Restore

"It depends on what settings you use. If you choose to backup files, it will keep a copy of the files. If you choose to back up the entire computer, it will backup a copy of everything (files, settings, startup, etc).

Directly from this page on the Microsoft site regarding backup and restore center:

Previously backed-up versions of files
use only a bare minimum of disk space.
If only a small part of a file changes
(such as one slide in a presentation),
only that portion gets tracked and
saved.

So yes, it does keep ""versions"" of the files, so to speak. You can change these settings according to how you want to save space as well. New backups can replace old ones, or build upon them. I suggest reading the above article for full information.

There are also small descriptions in the Backup and Restore Center:"