I'm a long time Mac user and, when I upgraded to Lion, was dismayed to find that the Save As command had disappeared as it was something I used all the time. When the command returned with Mountain Lion I was thrilled but, from what I can tell, it doesn't work the way it once did. Can you clear up my confusion?

Yes. Like you, I turned backflips when I saw that I could invoke the command in supported applications simply by selecting File, holding down the Option key, and choosing Save As. But that joy soon turned to gloom. For this reason:

Back in The Day, when you created a document, banged away on it for a bit, saved, banged away a bit more, and then chose Save As, you created a new document that included all the changes you'd made up to that point. The original file closed and the Saved As document remained. If you opened the original later, you'd find the content it contained up to the point where you invoked the last Save (not Save As) command.

The beauty of Save As from my perspective was that I could work on a story, make a few edits, and then take what I thought might be an interesting departure. If I then determined that departure might be ill-advised I could select Save As and have a greater sense of security knowing that I could always return to the original version.

That is not how Mountain Lion's Save As command works.