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Hi,
I am going to assume you are using SharePoint Server 2007 or WSS 3.0.
When version history is turned on, the SharePoint document library will store a version of the file each time it is saved. However, SharePoint will only show you the most current version in the library. To see the different versions, you need to select the document and when the hover menu appears, choose Version History. The different versions of the document will then be visible and can either be viewed, restored or deleted.
You can see more info on how this works at http://office.microsoft.com/en-us/help/HA100215761033.aspx?pid=CL100605171033
Regards,
Alex.
Alex Burton www.epmsource.com