From BlenderWiki
Undo system
Blender keeps track of the last operations performed. To do so, it keeps a stack with information on the last states of the blend file. This is called the global undo stack.
In addition, changes made in edit or sculpt mode on any object are also kept in the so called local undo stacks. Each object keeps its own.
A series of consecutive local changes (in edit or sculpt modes) are stored as a single entry in the global undo stack, as a single block. So to undo only a few of those, you must be in edit or sculpt mode. In object mode, for instance, all those will be undone as a whole.
If we access any of the local stacks, by undoing/redoing or even by popping up the list of actions of a specific object, local stacks from the other objects are lost. In that case, local actions of those objects will have to be undone as whole blocks.
Global undo uses a lot of memory (the full state of the file is stored for each operation), so it can be disabled from the Preferences editor. If we do so, only local changes will be available for undoing, with the mentioned restrictions.
