how does version control usually work? does it save diff files as a trail with hashes to validate the trail?
Version control is a system that records changes to a file or set of files over time so that you can recall specific versions later. For the examples in this book, you will use software source code as the files being version controlled, though in reality you can do this with nearly any type of file on a computer.
The types of VCS are: Local Version Control System. Centralized Version Control System. Distributed Version Control System.
Check out Eric Sinks blog series on version control.
Also, Joel Spolsky wrote Hg Init: a Mercurial tutorial, that finally made me "get" what distributed source control is all about.
There are more than one ways to skin a cat...
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