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Versions are part of the URL of a REST endpoint.  The Version name is a unique string value that can be used to create different namespaces for different custom Resources.

API version/Request

The last (darkest) portion of the URL reflects the request you are coding. The first part is the name of the API version you are targeting. Your code might create a prefix for the service/project portion to be pre-pended to the request. Avoid hard-coding the API Version into the URL, to facilitate controlled migration over revisions.

The second part is the actual request. This is your Resource Name, followed by parameters (the primary key, filters, ordering etc). Recall your Resource Name is either a Base Table, or a defined Resource. Resource Names can be specified with dot notation to access contained resources (e.g, OneCustomer.Orders).

API Versions on Named Resources

Once a new version is created - the Resource editor will allow you to switch between versions (the REST Lab will also allow filtering by version names).