A fundamental problem with conventional photo editing software is that each time you load and save a JPEG image it deteriorates slightly. Load and save an image more than a few times and this becomes noticeable. This cumulative distortion is unavoidable if you use JPEG format photos.
In the world of traditional printed photography, this is like creating each new print by copying the last print you made. Of course you'd never do this—you'd use the master negative to create the best quality prints.
The Xara Picture Editor overcomes this problem by keeping a track of the original 'master' image, much like keeping a photographic negative. When you load any JPEG photo saved from the Picture Editor, it automatically locates the original master and uses that as the source for all further processing. It remembers all edits your ever performed to any photo and lets you undo, or alter those at any time.
Every time you load a photo that had previously been saved from the Xara Picture Editor, it uses the original master image. This means that no matter how many times you perform the 'load–edit–save' cycle, you are always saving a first generation copy, just as if you'd used the negative with conventional photography.
See also
'Magic' undo
So how does the XPE do this? It keeps an a XML file we call an 'edit list' for every photo it has ever seen. This edit list tracks the original master image and a list of all the changes you've applied to the picture. When you load any processed photo it locates the original and applies the same edits. So now you can undo or alter any of the edits, such as crop, brightness, sharpness etc and instead of applying these to the already processed image, it just applies them to the original master. So you think you are loading and editing a processed image, but in fact you are altering a new first generation copy of the master.
And this is how it provides the unique ability to undo changes to saved pictures and always ensure that there is no cumulative distortion usually associated with picture editing.
Of course this requires that you keep master copies of all your photos somewhere, but this is good practice anyway—just as you'd always keep your negatives safe. If the XPE can't find the master then it gives you the chance of relocating it, or failing that just operates like traditional photo editing software and edits the processed image.