Google Docs has a feature to compare two different documents with each other and attribute the difference in a new document.
It is a different feature than document history or versions of documents.
When does it help?
I have a version of the document which I am sending to my colleague. He makes changes to it, and the document is getting changed over a course of time.
The Different versions of the document only show the state of the document at different times.
Compare document shows the exact difference of things. What is changed to what?
When you collaborate, it is easy to see the changes others make. Over some time you’ll lose the memory of where it all started. What are the changes the document undergone? This feature can tell you that.