On May 15th we announced on the Office 365 Roadmap (ID 30544) that we’re updating the versioning settings on all OneDrive for Business and SharePoint Online team site document libraries, including both group-connected team sites and team sites not connected to an Office 365 Group. We'll be gradually rolling this out to Targeted Release customers in early June, and the rollout will be completed worldwide by the end of July.

Protecting customer data is the most critical thing we do as a platform. In the lifetime of SharePoint Online, the most common form of data loss has been a result of un-recoverable changes; something that can be prevented by the versioning functionality. This feature is critical to undoing unwanted changes, and other recovery scenarios.

A few years ago, we enabled versioning by default and since then we have heard customers’ feedback that versioning can still be turned off by end users without fully understanding the implications. Some customers have even resorted to building custom tools to scan and keep versioning on for all the document libraries within their tenants.

To further protect end-user data, we will require versioning with a minimum count of one hundred major versions for document libraries in SharePoint team sites and OneDrive for Business.

What happens to my existing library settings on document libraries in SharePoint team sites and OneDrive?
Existing libraries that have versioning enabled but are set to retain fewer than one hundred major versions will be updated to retain the new minimum. Libraries already set to retain one hundred or more major versions will not be affected, including those with the default setting of five hundred.

Can I disable versioning?
With these changes, the document library settings page will no longer support the ability to disable versioning or configure it to retain fewer than one hundred versions. Developer APIs, however, will still allow for setting any custom retention count and disabling versioning, however for the reasons stated above this is highly discouraged.

This update may increase the number of possible versions saved for any document. With that said, earlier this year we announced plans to increase the SharePoint Online per user license storage allocation to allowing greater collaboration and storage capacity for organizations using Office 365 and SharePoint Online.

As stated earlier, we are rolling out this change to First Release users in June and the rest of tenants worldwide in July.

We have published this update to Office 365 roadmap and we will also update the Enable and configure versioning for a list or library support document when we start rolling it out.

As always, please feel free to provide feedback here or in our OneDrive UserVoice forums.

-The OneDrive Engineering Team

Source: New Updates to OneDrive and SharePoint Team Site Versioning - Microsoft Tech Community - 204390