The XML differencing algorithm implemented in the Compare tool in XMLmind XML Editor - Online Help requires all the elements to have a globally unique ID. This GUID, which is called a serial number, is assigned by XMLmind XML Editor (XXE for short) to an element during its lifetime and will not change no matter how you'll modify the content of this element.

Menu item Tools → Revisions → Enable the Comparison of Revisions in XMLmind XML Editor - Online Help merely instructs XXE to systematically assign a serial number to all the elements contained in the document being edited.

These serial numbers are all stored in <?xxe-sn> processing-instructions. Example:

<?xml version="1.0" encoding="ISO-8859-1"?>
<section version="5.0" xmlns="http://docbook.org/ns/docbook">
  <?xxe-sn c09ov3m4pt -1udd9r6h3v1fj?>

  <title><?xxe-sn c09ov3m4pt -1udd9r6h3v1fi?>Pangrams</title>

  <para><?xxe-sn c09ov3m4pt -1udd9r6h3v1fh?>"The quick brown fox jumps over
  the lazy dog"
  ...
</section>

The data contained in a <?xxe-sn> processing-instruction is a globally unique 128-bit ID formatted as follows: most_significant_64_bits_in_base36 SPACE least_significant_64_bits_in_base36.

Note that enabling the comparison of revisions should not slowdown XXE perceptibly. That's why there is an option in XMLmind XML Editor - Online Help which allows to automatically enable the comparison of revisions in all the documents created and edited using XXE.