Quote from the 31 Oct 2009 TechNet article "Learn more about system image backup":
During the first backup, the backup engine scans the source drive and copies only blocks that contain data into a .vhd file stored on the target, creating a compact view of the source drive. The next time a system image is created, only new and changed data is written to the .vhd file, and old data on the same block is moved out of the VHD and into the shadow copy storage area. Volume Shadow Copy Service is used to compute the changed data between backups, as well as to handle the process of moving the old data out to the shadow copy area on the target. This approach makes the backup fast (since only changed blocks are backed up) and efficient (since data is stored in a compact manner). When restoring the image, blocks will be restored to their original locations on the source disk. If you want to restore from an older backup, the engine reads from the shadow copy area and restores the appropriate blocks.
For the last days, a daily system backup of drive C: to drive E: has been scheduled and run by Windows 7 Backup and Restore. Drive C: currently holds 233 GB of data, which fits comfortably on drive E:, a 1 TB drive, with 727 GB of free space remaining.
How do I access the previous version of a VHD?
I right clicked on files and folders in E:\WindowsImageBackup, and I looked for Previous Versions but always: There are no previous versions available
