Windows 8 File History is a bit like Previous Versions in Windows Vista and 7, but it has to be set up and configured first. Unlike the System Restore-integrated file recovery in older Windows versions, File History keeps most backups on a separate hard drive, removable drive (external hard drive or USB stick) or network drive - only a small amount of previous versions are kept on system drive where Windows is installed.
Do not expect File History to cover all your folders or whole drives - it backs up all your default and custom Libraries (including Public Folders), plus Contacts, Desktop and Favorites folders. Your only way to include other folders is to create your own custom Libraries.
Unlike traditional backup apps, File History does not require administrator rights to set up, or back up and restore files. In fact, every user can configure it the way he/she likes and even use different drives.
It is recommended (but not required) to use Storage Spaces for File History drive.
Configuring File History in Windows 8
If AutoPlay is enabled, you can click the Configure this drive for backup option in the menu right after connecting an external hard drive or a USB stick.
Otherwise, open Settings Search using keyboard shortcut Windows Key+W, type "file history" into Search box and click File History.
Keep a history of your files window opens. Windows 8 tries to automatically select the best available drive (the one with most free space) for File History - secondary hard drives, external hard drives, removable drives and network drives can be used for this. Please note that File History is still not automatically enabled.
You can click the Turn on button if you are satisfied with File History destination drive.
In case you are using a drive that already includes File History from another device or you are restoring your files after using Reset your PC or Refresh your PC, enable the I want to use a previous backup on this File History drive option. If Windows 8 detects a folder named FileHistory on the drive, the check box is automatically selected. To add existing backups to File History on current PC, click to activate one of the available items in the Select an existing backup list.

If you want to use another drive instead, click Select drive on the left side.
Select a File History drive window opens. Choose the drive you need, or use the Add network location button.
Click OK and Turn on after making changes.

Windows 8 will make the first backup of your Libraries and Desktop, Contacts and Favorites folders right away. If you selected a drive with existing backup, the operation will be skipped, but it will run automatically after about an hour. You can now recover your files by clicking Restore personal files on the left.
To create a manual backup any time later, use the Run now command.
If Windows 8 has not been able to connect to your File History drive for several days, a notification appears in Action Center. Re-connect the drive as soon as possible.

Excluding sub-folders from Windows 8 File History
Sometimes you need to disable the automatic backup of specific folders - maybe you keep some temporary files or really large files there; or perhaps you do not want to make a backup of your Videos library for some reason.
To prevent backing up specific folders or Libraries, click Exclude folders on the left.
Click Add in the Exclude from File History window and select the folder(s) you don't need. To re-enable backing up a folder later, click it in the Excluded folders and libraries list and then click Remove.
Click Save changes.

Configuring Advanced Settings of Windows 8 File History
To set some more detailed options, or to clean up File History, click Advanced settings.
Versions section offers the following settings:
- Save copies of files - how often File History runs automatic backups. Default is hourly, but you can set the frequency to 10, 15, 20 or 30 minutes; 3, 6, or 12 hours; or choose to back up files once a day. Please note that a new version is created only when at least one item has changed.
- Size of offline cache - how much disk space to use on system drive (the drive where Windows is installed). Offline cache acts as a secondary backup in case your external File History drive is not available. Default is 5% of disk space, but you can choose between 2, 10 and 20 percent also.
- Keep saved versions - how long to keep the backups. By default, these are kept forever, but you can also select 1, 3, 6 or 9 months, or 1 or 2 years. If your drives are tight on free space, you can select the "Until space is needed" option and risk losing older backups quickly.
The section also includes the Clean up versions command that allows removing older File History backups.
HomeGroup section allows recommending your external drive for File History backups over the network.
Event logs section includes the Open File History event logs to view recent events or errors command that opens File History backup log in Applications and Services Logs section of Event Viewer.
As usual, click Save settings after making changes.
If you clicked Clean up versions, File History Cleanup window opens. By default, it deletes files that are older than 1 year, but you can also choose between 1, 3, 6 and 9 months or older than 2 years.
In case you desperately need disk space or you must remove older backups, select the "All but the latest one" option.
Click Clean up to erase older versions of files.
Restoring Libraries, folders and files with Windows 8 File History
The easiest way to restore files, folders and Libraries is to open Windows Explorer (keyboard shortcut Windows Key+E), navigate to the folder or Library where you need to recover items and click History on Ribbon.
If File History window is already open, you can click Restore personal files on the left.
If the folder or Library has been removed or you cannot find it, open Start screen Settings Search app using keyboard shortcut Windows Key+W, type "restore" and click Restore your files with File History.

Home - File History folder opens. It looks very much like Windows Explorer, but has three additional buttons in the bottom part: the left- and rightmost buttons scroll between available versions, and the middle button restores selected items.
Otherwise, you can browse inside available File History versions, use Search box and switch between different folder views.
All available versions are grouped by date and time of backup. To make distinguishing between available files easier, I suggest using the Details view (Ctrl+Alt+6) that reveals last modification time of all items.
To select multiple adjacent items, click the first item. Then hold down Shift key and click the last item.
To select multiple non-adjacent items, hold down Ctrl key while clicking. As usual, Ctrl+A selects all items.
The File History browser allows even previews of many types of files - just right-click an item and select Preview from the menu. If preview is not supported, you can open the file with its default program to see its contents.
Restoring items to an alternate location for comparison - the safest way with Windows 8 File History
If you want to restore a previous version of an existing file or folder, it is best to recover it to a different folder to avoid accidental overwrites.
Select the item(s) you want to restore, right-click and select Restore to from the menu.
Restore to window opens. Browse to the empty folder or create one. Then click Select Folder.
Restoring items to the original location with Windows 8 File History
If the original file, folder or Library has been deleted, or you are 200% sure you want to replace it with a previous version, select the item(s) you want to recover and click the big blue Restore to original location button in the lower part of File History browser window.
In case of file conflicts, the Replace or Skip Files dialog appears. You can click Replace the files in the destination to overwrite all existing files.
If you want to choose which files to overwrite and which ones to keep, click Compare info for both files (if there is only one conflict) or Let me decide for each file (if there are multiple conflicts).

File Conflicts window helps to choose which ones to keep and which ones to replace.