Overwrites unless the file is locked (ie. a .docx open in Word that two people are editing concurrently). If a file is locked you get multiple files with "(X's conflicted copy)" appended to their names
True, though I've found that very difficult to use in practice. I retrieved something through it once, but it wasn't pleasant. Especially with periodic autosaves, finding the last good version before an accidental overwrite requires trawling through pages and pages of old versions, with poor/nonexistent diff tools.
We use it all the time, with great success. We have one Dropbox (free account) for kids to keep their programming, drawing and other stuff in (one folder per kid). They lose their stuff all the time, in the most creative ways possible. Dropbox's 30-day version history can be a real lifesaver in those cases.
Although sometimes stuff is just gone and they're out of luck. I'm still not entirely sure what happens then, possibly a weird combination of everyone saving their project near closing time, the Internet connection maybe choking up a bit, and people shutting down their computer before everything is properly synced.
Conflicts are handled more elegantly than a simple overwrite. There are many ways to spin off a conflicted copy. This article covers the most common way: https://www.dropbox.com/help/36/en
Dropbox is pretty good about never losing data. It can be suggested that this is one of the most interesting or valuable parts of its technology. Its practical use of bandwidth is another.
