We recommend you create a new Project for every new Business Use case with a distinct set of Entities and audiences compared to other projects. This will help you manage the Test or Production service links and have tight security control over the exposed data.
A version is typically an extension of an existing project. You can create a new version of an existing project if the previously published version has an error and you want to decommission it and replace it with a corrected version. You can also create new versions when you want to expose additional Entities to a new set of User Groups.