Is there a way to set the system so that every document uploaded is forced with version control on automatically?
As of now, that is not an out of the box feature. You can always vote for your favorite feature requests here in our Help Center's PI#enterprise Feature Request page.
What value does the check out and check in feature do?
Check in/out keeps people from accessing the document when somebody has it checked out. That same user must check it back in to allow others to work on the document.
How does version control really work?
Version control was designed to upload the latest version over top of the previous version. PI will keep a history of the versions in the Versions tab in the bottom of the page. Feel free to download any of the previous versions at any time.