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You want 'Restore system settings and previous versions of files' selected, under 'Restore Settings'.
System Protection - Turn On or Off - Windows 7 Help Forums
System Protection - Change Disk Space Usage - Windows 7 Help Forums
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What is System Restore & How to Create a Restore Point in Windows
How to Configure The Way System Restore Works & How to Disable It
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Configure System Restore in Windows | www.winhelp.us