I didn't know that "Ask to keep changes when closing documents" affected Autosave.
Lion was loved by many, and equally hated by at least as many. Apple was deluged with users who demanded a way to turn Autosave/Versions off and bring back Save As instead of the confounding Duplicate to the OS and its apps.
When you turn that check box on, Autosave is still doing its thing in the background for the apps that use it (mostly Apple's), but causes a major difference in the result of closing a file. Without it (and doesn't even exist in Lion), when you close for example, a TextEdit file, it is saved with those changes whether you wanted it to or not, and it doesn't even ask.
The most frustrating part was/is the way Duplicate works. As you know, when you do a Save As in Snow Leopard or earlier, that new file takes on all of the changes you may have made up to that point. You close the original, and none of the changes are saved to that document, unless at some point, you intentionally pressed Command+S to save changes while you were working on it. That's what people were used to and what they expect Save As to do. Now do the same thing in Duplicate. Make a bunch of changes without saving and create a duplicate. Close the original. What happened? Your original just got saved with all of the changes you've made, making the whole point of branching the changes off to a new file moot. You now have two identical files instead of your original and only the duplicate with the changes.
Turning the check box on stops this behavior, even though Autosave is still doing what it does in the background. When you close the original, the OS asks if you want to Revert Changes - Cancel - Save, instead of simply closing the file with the same changes and not even asking what you want to do.