Versions are older copies of files. Typical files that can have older copies/versions of themselves are "word" documents, images, spreadsheets, etc.
Let's say you have an image file that is backed up to the ReadyNAS Vault and you decide to make some edits to the image (i.e. cropping, change contrast, etc). Once you save the edits, the Vault will recognize and upload the new file as the most current file; but it will also keep the previous copy as a "version" in your account.