A general summary: MAJOR.MINOR.BUILD
The major version number is incremented whenever there is a major or incompatible change (duh). A major version of 0 means that the game is not completed. The one exception to the rule is when transitioning from the development phase to completion (0.x.y -> 1.x.y).
The minor version is incremented whenever new feature(s)/content is introduced and the changes are backwards-compatible.
The build number is incremented every time I apply a save. This number is never reset (0.6.65 -> 0.7.66; 0.5.30 -> 1.0.31).

My main reason to use this scheme is for looks. Whenever I save a project, I never click "Save", I always click "Save As", so I don't have to go back as far if I mess something up. Doing this, you need something to differentiate between versions anyway, so having the build number as part of the version number makes it look nicer.