In the Editorial Cycle, the episerver document says
As for “Reject Changes,” it might be fair to assume it just changes the status of the Draft Version back to “Not Ready” and lets you edit again…but it doesn’t.
if an approver rejects the changes, will it be back to the draft version or will it completely discard the changes and the person who did the changes need to start from scratch.
You didn't specify which EPiServer 7.5 release you're using, but from v7.6 it works like this:
When a page draft set to 'Ready to publish' is rejected, it is reverted to a 'not ready' state (I don't think it actually says "Rejected" anywhere on the Publish menu, just details about when the page was last changed/published).
A rejected draft is reverted to its previous state, meaning the changes you made are saved but not published. I.e. you don't have to start making the changes from scratch.
The text you're referring to is actually from a blog post by Deane Barker (http://world.episerver.com/Blogs/Deane-Barker/Dates/2013/12/The-Editorial-Cycle-in-CMS-7/), not the official EPiServer editor's manual (which is found at http://world.episerver.com/globalassets/documents/manuals/episerver-cms/user-guides/7.5/editors/episerver-7.5-cms-user-guide-for-editors-print-in-english.pdf)
Deane usually does excellent research for his blogs, and you can expect the information in this one to be accurate (probably even more accurate than the official docs).
Edit: A rejected draft version will show "Status: Rejected" in the Versions gadget in the navigation pane.
How can I do this programmatically in episerver 7.5?