LiveSide.net has made a post regarding the functionality of Microsoft's upcoming cloud based version of Office. Not only will the current Office Live Workspace, which can be accessed at https://office.live.com, be completely replaced by Web Apps, but Web Apps will actually borrow a nifty little feature from it--version support.
Version support, also called versioning, gives users the ability to go back to previous versions of their documents; Google Docs has a similar feature baked in. This feature is also similar to Shadow Copy, which Windows uses to allow similar functionality. This will prove to be a very useful feature that really shows just how beneficial a cloud based service can be.
With multiple edited versions of the same document, you can always go back to previous versions thanks to the online file management provided by Windows Live SkyDrive — another key part of transforming Hotmail and Office into a great personal productivity solution."