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Why version is not always recommended on all lists?

Does it always keep copies of the list item for each version?

Can we enable only the changes the user has done to be displayed when a person check version history?

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It is recommended if you propelry configured it but if you keep the default setting(which include unlimited Version Numbers) then it is not.

In SharePoint 2010, Yes it keep the complete copy (create a new row in database) of item on each version change. Same true for Document Library.

Check Best Practices for versioning whitepaper

But If you are asking SharePoint 2013, Then their is change in storage methodologies for documents. New Feature is Called Shredded Storage,

Its a new Feature Introduced in SharePoint 2013 where Documents and Changes to the Documents are stored as “Shredded BLOBS”.Unlike SharePoint 2010, it helps to lower down the amount of storage required for saving files by saving only the Changes and not the entire Versions of the Files in database

So it is big saving on the storage. Read more about it for more understanding.

http://www.learningsharepoint.com/2012/12/14/sharepoint-2013-shredded-storage-how-it-works-part-2/

http://curah.microsoft.com/38605/sharepoint-2013-shredded-storage

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