From James Marshall,
Your Guide to Word Processing.
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It is always a good idea to create backup copies of your documents: you never know when you are going to need to recover a previous version of your document due to a power failure or simply human error while cleaning out some of the files from your hard drive.

If you are too busy to create your own backup copies of your documents or if you simply forget to create backup copies on a regular basis, you can have Word create automatic backups for you:

1. Select Options… from the Tools menu
2. On the Save tab, select Always create backup copy
3. Click OK

Before a backup copy is created, you must save the document more than once. The backup copy will appear in the same folder as the original document with “Backup of” preceding the document name. You can open and edit it as you would any other document.

Note: Having Word create automatic backups of your documents should never be used as a substitute for backing up your hard drive on a regular basis!