For explanations, see
http://www.word.mvps.org/FAQs/General/AutomaticSave.htm and
http://www.gmayor.com/automatically_backup.htm.
In essence, the "Always create backup copy" stores a renamed copy of
the document *as it was at the time of the last save* -- this is *not*
what's usually meant by "backup". If you save, wipe out half of the
document, and save again, the "backup" will have the missing half. But
if you save, type 10 pages, and then close without saving again, those
10 pages are *gone* -- never to return. They simply never got written
to the disk.
The AutoRecover feature is another case of "less than meets the eye".
An AutoRecover file is automatically erased when you exit from Word
normally (File > Exit or click the X button). It relies on the fact
that if Word crashes, it won't have a chance to erase the AutoRecover
file, which will be discovered the next time Word starts. Don't count
on it making up for your mistakes, because it won't even be there when
you need it.
One last thing to remember when you get that "oh s**t" feeling: as
long as you don't close the document, you can usually get back to
where you were by pressing Undo (Ctrl+Z) enough times. The worst thing
you can do is panic and close the document or close Word, because then
the Undo list in memory gets wiped out.
