SharePoint Online: How to Enable Versioning on a Document Library using PowerShell

What is versioning in SharePoint Online?
Version history feature in SharePoint Online tracks every change to the document and creates a copy of it when someone changes a document. Each version of the document has the following:

• Version No
• When the version was created
• Who made the version (change)
• Size of the version

Once the versioning feature is enabled, you can view/restore the previous versions of the document.

How to Enable Version History in SharePoint Online Document Library?
To Enable or Disable Versioning in SharePoint Online Document Library:

• Navigate to your document library >> Click on Settings gear >> and then "Library Settings" Menu item.
• Under Library settings page, Click on "Versioning Settings"
• Select "Create major versions" option and enter number of versions to track (by default, this is enabled with 500 versions in SharePoint Online).
• Scroll to the bottom of the page. Click "OK" to apply versioning setting changes.

SharePoint Online: PowerShell to enable versioning in document library

#Load SharePoint CSOM Assemblies
Add-Type -Path "C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\16\ISAPI\Microsoft.SharePoint.Client.dll"
Add-Type -Path "C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\16\ISAPI\Microsoft.SharePoint.Client.Runtime.dll"

Function Enable-DocLibraryVersioning()
{
    param
    (
        [Parameter(Mandatory=$true)] [string] $SiteURL,
        [Parameter(Mandatory=$true)] [string] $DocLibraryName
    )    
    Try {
    #Setup Credentials to connect
    $Cred = Get-Credential
    $Cred = New-Object Microsoft.SharePoint.Client.SharePointOnlineCredentials($Cred.UserName,$Cred.Password)

    #Get the Library from the web
    $Library = $Ctx.Web.Lists.GetByTitle($DocLibraryName)

    #enable versioning in sharepoint online
    $Library.EnableVersioning = $True
    $Library.MajorVersionLimit = 50

    $Library.update()
    $Ctx.ExecuteQuery()

    write-host  -f Green "Version History Enabled for Document Library!"
    }
    Catch {
        write-host -f Red "Error enabling versioning in Document Library!" $_.Exception.Message
    }
}

#Set Parameters
$SiteURL= "https://crescent.sharepoint.com/"
$DocLibraryName="Project Docs"

#Call the function to enable versioning in document library
Enable-DocLibraryVersioning -siteURL $SiteURL -DocLibraryName $DocLibraryName

To Enable version history on all lists and libraries, use: 
SharePoint Online: Enable Versioning on All List and Libraries using PowerShell