tfs - TFS compare before check in - what's being compared to what?

Question

In TFS, on the check-in dialogue, I'm often using 'compare > With Workspace Version [my machine name]', to see the changes I've made to files (see screenshot). So it seems as if TFS is comparing from the repository to the selected item (i.e. your local workspace copy), which I still find counter-intuitive. Can anyone confirm if I'm correct on the way I'm understanding what's being compared to what?

The MSFT workspace documentation isn't doing it for me:

http://msdn.microsoft.com/en-us/library/gg490753(v=vs.100).aspx

and I'm not seeing guidance on this in the context help for this dialogue:

http://msdn.microsoft.com/en-us/library/ms181411%28v=vs.100%29.aspx

and this talks about comparing but without a clear explanation of what's being compared:

http://msdn.microsoft.com/en-us/library/ms181400%28v=vs.100%29.aspx

The use guide on Codeplex looks promising, however I'm just interested in an answer to my simple question right now:

http://tfsguide.codeplex.com/releases/view/6280

Answer 1

Let's assume that in the morning I do a Get Latest and that gives me v4 of some file. I make some changes over the day, let's call the resulting local file with my changes v4.1. Also during the day some other developers check-in some changes to that file, so now TFS holds v7 of that file.

Compare With Workspace Version - Compares v4 to v4.1

Compare With Latest Version - Compares v4.1 to v7