When you enable mercurial's evolve, history rewriting operations are no longer destructive. Mercurial's evolve creates a sort of repository "meta history" by saving every revision before you modify it (e.g. by using amend). It makes those saved, old versions "obsolete" and it "hides" them (so that they won't show on your DAG when you do "hg log", for example, unless you use the --hidden flag). Evolve also keeps track of the relationship between obsolete revisions and their "successors". That is, it will know whether a certain revision in your DAG is the result of amending one revision, or perhaps of folding several revisions into one, or splitting one revision in two or perhaps just removing a revision from the DAG (this is what I called repository meta history above).

Those hidden, obsolete revisions are not shown on your DAG and they are generally not pushed nor pulled. In most respects they behave as if they were not even there. It is only when you need them that you can show them or go back to them (by using the --hidden flag of some of mercurial's command such as hg log or hg update). This gives you a nice safety net (since rewriting history is no longer a destructive operation) that you can use _if you want_. It also makes it possible to rewrite revisions that you have already shared with other users (since when you push a successor revision you also push the list of revisions that it is the successor of).

I think evolve is a significant step forward on the DVCS paradigm as it enables safe, distributed, collaborative history rewriting. This is something that, AFAIK, was not possible up until now.