PC users either: A) Love living on the edge or B) Simply don't care enough about their data to regularly back up files. According to Microsoft, only five percent of consumer Windows machines make use of Windows Backup and Restore, and less than fifty percent use a third-party backup solution. Think of all that data!
File History, a feature built into Windows 8, is Microsoft's solution. The service sits in Windows 8's Control Panel and, theoretically, offers the one element missing from previous Windows backup solutions: an accessible user interface. As Ars Technica wrote on Tuesday, Windows has actually been offering an automatic backup tool for years. Problem is, nobody really knew how to use it, and it's buried deep within Windows Explorer.
File History will attempt to solve that problem, but uses a different process to backup files that has its own disadvantages. While the Windows Vista/Windows 7 backup solution called Previous Versions (or Shadow Copies, back in Windows Server 2003) takes a whole system approach like Apple's Time Machine, File History takes a piecemeal approach to preserving files. The old method would keep watch over your entire hard drive. The new one watches a few key locations: libraries, contacts, favorites, and desktop. If your files aren't in those folders, they aren't protected.

Previous Versions used the Volume Snapshot Service to take snapshots of in-use files so that they can be copied by the backup software even as their live counterparts are being used in another application. VSS worked at the block level of the OS (if you've ever run a defrag utility on your HDD, you can visualize your data split up into blocks). When the system created a snapshot, it saved the original block and created a new one for later modifications. The original data was preserved, and the new block only needed to contain information about what was changed.
It all sounds pretty cool until you see the Previous Versions tab buried within Windows Explorer's property menu. Pretty easy to see why no one used it. It also serves as a different sort of backup solution than the new File History: because Previous Versions worked at the block level, it only saved file versions on a single hard drive. You could look through all the changes you'd made to a file for a year, but a hard drive implosion would wipe that out in a second.
File History does the complete opposite: it requires you to save to another volume. The underlying service is also very different. File History relies on the Update Sequence Number Journal, a feature of Windows that has been around since 2000. USN tracks all the changes made to files on your computer in the simplest way possible. It doesn't contain information about those changes, just that they've occurred. Programs can read that list and see what's changed and react accordingly to, say, reindex files.
File History deals with whole files rather than blocks of data, but only files in libraries, favorites, contacts, and on the desktop will be backed up. Want to backup something else? Better create a library for it. The upside is File History is nicely integrated into Windows 8's Explorer--you can see versions of a whole library with one click.
In classic Windows fashion, Previous Versions may not be gone in Windows 8, but rather buried away somewhere (just like it has been all along, basically). Which means Windows 8 users will still probably end up losing some files here and there. Without resorting to a third-party backup solution, OS files are unprotected. And who wants to go through all that effort?