Using Areas and Iterations in Team Foundation Server 2008

Question

If you are using TFS 2005 or 2008, how do you user iterations and areas?

Do you create an area for specific parts of the application you are building?

Here is an interesting article on areas and how the TeamSystem team uses them:

http://blogs.msdn.com/ericlee/archive/2006/08/09/when-to-use-team-projects.aspx

But, i'm even more curious about iterations and I would be grateful if you could show me few concrete examples.

Do you create iterations based on milestones or based around certain functionality?

What happens when you finish v1, how do you manage v2 or updates to v1?

We are using MSF Agile template.