When someone changes and saves a file that is already open, a conflict occurs and Cubby creates a conflict file containing the contents of the edit (the conflict file is older, the "original" file is newer).
Here's a sample conflict file. The file's original name is 1.txt.
(conflict at 2013-01-24_16-14-14).txt
No change is ever lost. Nobody's changes are ever overwritten. Changes made in the original file are all there. Changes made in the conflict file are all there. That said, you may need to merge files to resolve the conflict. For example, for a doc file you would use Word to merge the conflict file and the original.
Conflict files are not the same as versions. Versions are created for files with the same file name, whereas conflict files are always created with a new, unique file name.