Pretty much all wikis have an edit history, which includes the ability to revert to previous versions. This is just an ‘undo’ function, extended back in time indefinitely, but also with the potential to extend to other users.

Lots of reasons, among which, to track editor contributions, for reputation reasons. Allowing ‘undo’ is one foundational principle of good user interface design.

Group edits sensibly – e.g. one editor’s uninterrupted edits on a single day could be merged at the end of the day, which would imply that no record is kept of mistakes that are quickly undone. An advanced tool could allow a user to record edits with finer granularity, but a basic interface should allow something that makes it easy for inexperienced users.

If possible, allow undoing past changes that have not been overwritten or modified by subsequent changes.

As for how to hold the history, that’s a good question. It would be great to see some kind of “diff” system that preferably not line-oriented (though line-oriented could do for starters). Line orientation is fine for code, and most poetry, but for free text a line is not a natural unit.

Fedwiki has a very rich edit history.

MediaWiki “View history” sort of works, but could it be simpler? Google Docs “Version history” is also very useful, but may be harder to implement.