All changes to an entry are recorded in its version history. The version number will depend on the workflow state that the entry is in. When an entry is first created its version is 0.1.
Save an entry
Each time a change is made to an entry and saved, the minor version number is incremented and the changes are recorded in the entry activity panel.
For example, adding some text to a field of a newly created entry and pressing Save would increment the version number from 0.1 to 0.2.
Publish an entry
When an entry is ready for publishing, pressing Publish in the entry editor will change the major version number.
For example, having populated all the fields of my newly created entry and saved it, pressing Publish would increment the version number from 0.2 to 1.0 and change the workflow state of the entry to Published.