Compare with Latest version
seems clear. It compares files against the latest version in TFS. So you’ll get all the differences between the very latest version checked into source control and whichever folder you’re comparing against.
Compare with Workspace version
might be confusing, but is actually pretty simple. TFS keeps track of the version of the file which you’ve retrieved into your workspace. This is usually the latest version, or pretty close to that, but that doesn’t have to be the case.
When using the Get Specific Version option you can retrieve any version of a file to your local workspace. You can even retrieve files from different versions into your workspace. When you select this option, a comparison will be done against the version that is currently in your workspace.
