Every version is kept
Pages, blog posts, books, FAQs, custom entity records, product descriptions, forms and global components are versioned. "Save new version" and "Save and activate" add a version, and the earlier one stays exactly as it was; only "Update version" changes the version you are editing.
That changes how you can work. You can rewrite a page substantially without risk, because the previous wording is still there and can be made current again in a few clicks.
The active version
One version at a time is active: the one the site shows. "Save and activate" makes your new version active straight away; "Save new version" keeps it aside until someone activates it (see Previewing and publishing).
Making an earlier version active again is how you undo. It deletes nothing: the record points back at the earlier version, and your newer one stays in the list.
Drafts
A draft is one person's work in progress on a record. Each person has at most one draft per record, and saving the draft again updates it. A draft can never become the active version, so it never shows on the site.
Comparing versions
The versions list at the top right of the edit screen shows who saved each version and when, and compares any version with the current one side by side. It answers "who changed this, and when?" without anyone having to remember. See Versioning.
What is versioned and what is not
A version holds the content: the title, the layout and the value of every area. The record itself holds what identifies it: its slug, its parent, its position, its publish date. So changing a page's slug or publishing it takes effect at once, without a new version, and making an old version active does not bring back an old slug.