I used to write novel in one big file. Just keep adding on, doing daily editing etc. all within the same file. Sure, I'd make backup copies of the file at assorted points, but it was basically one file, say, "novel.doc" that kept growing and changing. Then I read somewhere on Holly Lisle's journal last year that she does a "save as" each day and so each day's work gets appended on the main work but in its own file. This gives you both a backup and a time line progression of where you were at the whole way. And the most recently dated file will always be the current file with the whole novel in it.
I went, hm, that's interesting. Let's give it a try. So, I then had files named "novel 08-30-05.doc" etc.
And what then completely surprised me was how fast I got used to this system. I can't think of working any other way now, and I even do longer short stories in this manner. Sure, I end up with a lot of files (I have 61 on my current novel, which is rather interesting in itself -- 91K, 61 days, average of nearly 1500 words per day), but then I hit a night like tonight, where I realize that two nights ago I screwed something up. I wrote a scene on Sunday, decided on Monday it went the wrong direction and promptly deleted it and wrote a new one. Now, here I am on Tuesday, realizing the first version was the correct one. Had I been working in just one file, that original scene would have been gone. I would have deleted it and overwritten it with the new scene. But tonight, all I had to do was just go back to Sunday's file, copy and paste the scene into today's file, and life was good. I lost nothing. I don't have to recreate the scene from memory.
Daily backups. Don't leave home without them.