sqz backup is how UFT saves data. You should make a backup of your information often. To do that, go to file/saveas/...backup. It will automatically save it in your C:/UFT/PROJECTS folder with a .sqz extension.
the newest version is 3.0 with one last update (available online) of 3.1 prior to it's demise. To find out what version you have, go to help/about UFT and it will say.