Definition: Version compatibility testing checks that a new version of software works correctly with data, configurations or installations created by earlier versions. It often involves upgrading an existing system rather than installing from scratch.
So what? Customers rarely start fresh; they upgrade systems full of data built up over years. Testing against long-lived installations finds problems that clean installs hide.
Examples: Upgrading a test installation that has run through many previous versions and checking its data can still be queried. Restoring a backup taken on an older version and confirming the new version reads it correctly.