Windows Vista comes with a built in data recovery service called ‘shadow copy’. By default Shadow copy client and service installed in windows vista. To install shadow copy client on earlier operating systems including windows XP Read this article. Data recovery with shadow copy becomes easy on windows vista to recover deleted, edited and corrupted files and folders.
Viewing recoverable files or folders by shadow copy called ‘previous version’, and you can view the previous versions of your folder or file by right click and go to ‘Previous Versions’ or you can find this tab in properties dialog box.
To restore a corrupted or edited file by shadow copy, go to the previous versions tab.

Recoverable previous versions of the file can be viewed in this box with date and time. Select the version and press,
Open – to open the previous version of the file in cache mode. This will help to find out the correct version of file you are looking for.
Copy- to copy (Restore to different location) the version of the file to a desired location.
Restore – to restore (overwrite the original corrupted or modified file) in the original location where you are viewing the file.
Recovering the folder also as same as file recovery above.

But when you ‘Restore’ a folder, it will overwrite the entire files and folders inside the recovering folder. There for do this method only if you want to recover lot of files and folders inside one folder. DO NOT try this method to recover single file inside one folder.
Data Recovery With Shadow Copy how works? on Microsoft site
Check this post to recover deleted files and folders by shadow copy.
Check the post to know how shadow copy works and modify the settings in Vista



