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The archive gets all completed actions, along with their parent structures. The parent structures are also left behind in the main database, unless they are also complete. OF is smart enough not to keep recreating parents in the archive.

For example, suppose you have a long running project "Run Dairy Farm" with a repeating action "Milk the cows" under it. You've milked the cows every day for months. When you archive for the first time a "Run Diary Farm" project will be created in the archive and all completed "Milk the cows" actions (completed before the archive cut-off date) will be moved to the archive under the new project. The "Run Dairy Farm" project will remain in your main database also, along with the incomplete "Milk the Cows" action (and all "Milk the Cows" actions completed after the archive cut-off date).

Suppose another month passes and you archive again. The completed "Milk the Cows" actions from before the cut-off date will now be moved to the archive under the existing "Run Dairy Farm" project. If you someday complete the dairy farm project, then upon archiving it the archive version of the project will contain all the completed actions and nothing will remain in the main database.

Upon upgrading to 1.7 you should have been prompted whether or not you wanted to archive.

I've been using the archive for nearly a year, since it was first added, and haven't lost any data. Rather than the incremental archiving OF currently uses, there are some folks who prefer to be able to view all completed actions for a project, and only archive the project when the project itself is completed. There's a thread on the forums discussing how to do that. (Sorry, I don't have a link. Try a search on "archive", or perhaps one of the participants from that thread will jump in here.)