I still find that automatic behaviour a bit troubling, though. It's just not very clear to me as a user what will actually happen. Say I have a file on my harddrive in January and February, but accidentally delete it in March. When I remember I once _had_ that file and want to recover it in December or, say, March year _after_ I've deleted it, will it still be around? It says it'll delete older files first, but this does in no way mean that such a file would actually be less important to me.
Also, I find Time Machine's interface very troubling. It's not intuitive at all (see this entire thread for proof), goes against most things of the rest of OS X' interface and simply doesn't provide enough information for my test. I'd love to see a _timeline_ for a file. Like: It was created on 2008-01-20 at 14:22h, changed on 2008-01-21, 2008-01-28 and deleted on 2008-02-15, so I could very simply choose the right version. I want to see this on a timeline from left to right, not back (invisible) to front. It's counterintuitive imho.