If your response to the title is, “Well, duh!”, you may stop reading here.
If you’re wondering, “What’s Time Machine?”, it’s OS X’s built-in automatic backup capability. You can pretend the title is “Periodic backup is not version control”.
If you’re wondering, “What’s version control?”, it’s a mechanism, formal or informal, that preserves copies of earlier versions of a document, with an eye to be able to undo changes if necessary, or at least go back and see the history of changes to a document. Programmers will think of version control systems like Git or Mercurial or Subversion. If you keep backup copies of your important Word documents at various stages in their life, that’s informal version control. OS X 10.7 (Lion) has a form of built-in version control for some applications.
Time Machine effectively backs up your entire system once an hour. If you mess up a document, it’s possible to go back to a previous version and restore it to its previous state. This capability makes Time Machine temptingly resemble version control. But treating it as such is hazardous (which is not to deny that it can be very handy, even a life saver, when it works). Why?
A secondary reason first. Time Machine does a backup every hour, but it doesn’t save all of those backups. It saves the hourly backups for the past 24 hours, daily backups for the past month, and weekly backups for everything older than a month. So it’s entirely likely that the versions of your document that Time Machine has available are not the ones you’re interested in.
The primary reason is this. A document’s previous versions are themselves documents, and potentially important ones. Important documents need to be backed up, which is to say that you need at least one redundant copy. But if you’re relying on the Time Machine copy (or any backup, for that matter), you have only one copy of the historical version of the document: the one on the backup disk. If that disk fails, you have no backup at all.
So keep using Time Machine as a safety net. But if the thought of all those old versions disappearing completely makes you nervous, start thinking about some other means of version control, one in which the old versions are backed up.