Does it track changes in one document (when enabled), or can you give it two documents and let it highlight changes?

(A fairly common occurrence when many people's distributed version control system consists of emailing around "thesis_v0.9.doc", "thesis_v1.0.doc", "thesis_final.doc", "thesis_final_v2.doc", etc. See also: http://phdcomics.com/comics/archive.php?comicid=1531 )