Most people know that you can recover files that you have deleted from Dropbox within the past 30 days (or longer if you pay for the “packrat” feature).
But you can also recover previous versions of files.
Select the file in Finder and click on the Dropbox icon in the toolbar and choose ‘View Previous Versions’:
The Dropbox.app will then take you to the Dropbox website and show you all of the previous versions of that file from every time you hit Save (as long as you were online and the Dropbox.app was running).
You can also view revisions from the Dropbox website. Login to Dropbox.com and then navigate to the file on the website under http://dropbox.com/home, and select the file. Once you have the file selected, choose “More” from the Dropbox toolbar and then choose “Previous Versions”
The interface isn’t as fancy as Time Machine, but Time Machine only runs (at most) once an hour. You can make a lot of changes in an hour. Mac OS X Lion (and later) also has a “Versions” feature, but the app has to support it. Dropbox does this for every file, even images.
The only thing to remember is that Dropbox versions are tied to a file’s name and location. So if you have a file named “Report.txt” in your ~/Dropbox/ folder and save it 72 times and then you move it to ~/Dropbox/Archive/, you won’t see your revision history. (You could if you move it back to ~/Dropbox/Report.txt however).
I wrote more about this at A Quick Guide to Dropbox Versioning on TUAW.com.