Windows Live Writer has an automatic save feature. This is different then “Auto-Recover” which is what you find in Microsoft Word. In Windows Live Writer, there is a timer that triggers every X number of minutes. When the time triggers, it saves your post for you automatically. This has some draw backs. First of all, if you are typing or editing your post when the timer triggers, you might feel some lag as your post is saved. Second, if you open a post, edit it for 10 minutes and then decide you no longer like your edits, auto-save has already saved the file a few times while you are editing, and you cannot revert back. The latter is the reason the auto-save feature is not turned on by default.
To turn on auto-save:
1) Tools > Options from the file menu
2) Click “Editing” in the left hand navigation
3) Check “Automatically save drafts every”
BONUS BUG: As an interesting side note, if auto-save triggers while you are in a dialog, like the insert video dialog, you lose the ability to “undo” all the changes you have made up to this point. 🙁