Dropbox – Does Dropbox Sync Incremental Updates or Whole Files?

Answer by Moo at Serverfault:

Dropbox uses a binary diff algorythm to break down all files into blocks, and only upload blocks that it doesn't already have in the cloud. All of this is done locally on your computer.

Dropbox doesn't just use your files that you have already uploaded, it aggregates everyones files into one database of blocks, and checks each local block hash against that database.

This means that if someone else has uploaded the same file as yourself (say for example, the latest Ubuntu iso), then the upload will seem instant as there is nothing to upload, but if you are updating a file that changes regularly, like your backup file, then only the changes are uploaded. If you upload a totally unique file, then you have to wait for it all to upload.

You don't have to make any manual effort. Once a file is in your Dropbox folder, it'll be synced to any computer that has access to your Dropbox folder.