System protection is a new feature with Windows Vista and above. It works with NTFS disks which support shadow copies. Generally it works like system restore with files so that if a problem like a bad driver or bad windows update will not cause problems. Everyone knows how bad video card drivers can be,
In a way this is an extension to the recycle bin. Now system protection can protect all files.
System protection also saves previous versions of files that you’ve modified. It saves these files in restore points, which are created just before significant system events, such as the installation of a program or device driver. They’re also created automatically once every seven days if no other restore points were created in the previous seven days, but you can create restore points manually at any time.
Starting with Windows 7, system protection is automatically on for the drive that Windows is installed on. System protection can only be turned on for drives that are formatted using the NTFS file system. If you are using multiple disks, you can enable system protection for other NTFS volumes.
Previous versions are either copies of files and folders created by Windows Backup or copies of files and folders that Windows automatically saves as part of a restore point. You can use previous versions to restore files and folders that you accidentally modified or deleted, or that were damaged.
Depending on the type of file or folder, you can open, save to a different location, or restore a previous version.
Previous versions are automatically saved as part of a restore point. If system protection is turned on, Windows automatically creates previous versions of files and folders that have been modified since the last restore point was made. Typically, restore points are made once a day. If your disk is partitioned or if you have more than one hard disk on your computer, you need to turn on system protection for the other partitions or disks. Previous versions are also created by Windows Backup when you backup your files.
If you modify a file several times in one day, only the version that was current when the restore point or backup was made is saved as a previous version.
With modern high capacity disks, having shadow copies of files makes it safer in case of a disk error. You should still have a robust backup solution to cope with hard disk and SSD failures. Using a second disk in a gaming box is fastest, NAS are limited to network speeds. Using a second disk to make the backup, which can then be copied over the LAN is fastest. Redundant backups minimize risk.