Google Desktop doesn't delete from its index the files you have deleted or moved. Of course you can remove files one by one from the index, but that's not something you would do for every deleted file.
While some people (including me) may say that Google Desktop is not very clever and it should detect non-existent files in its index and remove them, you should also see the bright side. Google Desktop caches files, so if you delete an important Office document, you will have the HTML version in Google Desktop cache. Of course, it doesn't have images, charts or fancy tables, but it does have the text and that's the most important.
So if you don't have a data recovery software, you can use Google Desktop as a partial replacement. A data recovery software recovers complete files (not just the text as Google Desktop does), but it's also expensive.
Google Desktop stores in its cache different versions of a file, so you could use it to track differences between the original document and its later edits.
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