They store the last 30 days worth of versions of every file you modify. Dropbox could keep versions from the last 10 days in S3 but move the rest to Glacier. Restores for older versions wouldn't be instant, but if S3 storage is a nontrivial expense for them moving the bulk of previous versions to Glacier would cut down on costs.

And 30 days is only for free accounts.

Packrat is a Dropbox Pro add-on feature that saves your file history indefinitely.

I would guess it's a non-trivial expense ;-)