In Contribute CS4, the Annotation Mode of Review feature is available.
For example, create a new page and send it for review to a Reviewer. The Reviewer, placed the received draft in review mode and select the text and annotate in the same and sends back. So the annotated text will be highlighted and mouse hovering on the same will show the comments.
For more details please refer to http://help.adobe.com/en_US/Contribute/5.0_Deploying/WS5b3ccc516d4fbf351e63e3d117a7496ada- 7ff9.html
So sounds like the bottom line is, this feature doesn't exist in Contribute. You can manually highlight changes if you'd like, but there's no way to see get version differencing where it automatically shows you what changes have been made.
Just been playing with this feature today and I can confirm that their is no feature in Contribute to highlight changes automatically.
Also only the reviewer can add comments (and thus highlights areas of the page) but not the editor. There no way for the editor to highlight their changes (using the annotation/comments feature) - they could possibly use a custom style set up by the website admins though. You'd want to make sure that these styles are removed later though - or at least no displayed on live site. (We work in a staging and live environment.)
ALSO the webpage needs to have doctype of XHTML to use comments. So, can't use annotation/comments on an HTML Transitional/Strict site, etc.
We're probably going to have to go with using Word Track changes for our content editor to highlight changes. Our web team will only be doing technical reviews (checking appropriate code, styles, etc. used) and have external version control software that they can use to highlight changed portions of the code.
*sigh* I was hoping it'd be easier than all this - oh well...