So after reading over this thread and thinking about it for a while, the statement is correct from the admin's guide, but it is a bit vague.
Regardless of if you are using Archive bit or Modified time, the differential will back up only changed files since the last archive bit reset or the modified time. The Modified time of the last backup is stored in the database, so we will only look for files that have been changed since then.
Example: Full + Incrementals and Differentials
Monday Full - All files backed up, Archive Bit reset or Modified time set.
Tuesday - Incremental, only files changed since the Monday full.
Wednesday - Differential, only files changed since the Tuesday Incremental
Thursday - Differential, only files changed since the Tuesday Incremental
Friday - Incremental, only files changed since the Tuesday Incremental
Saturday - Differential, Only files changed since the Friday Incremental
Example: Full + only incrementals
Monday Full - All files backed up, Archive Bit reset or Modified time set.
Tuesday - Incremental, only files changed since the Monday full.
Wednesday - Incremental, only files changed since the Tuesday Incremental
Thursday - Incremental, only files changed since the Wednesday Incremental
Friday - Incremental, only files changed since the Thursday Incremental
Saturday - Incremental, only files changed since the Friday Incremental
So what you see here is regardless of archive bit or modified time, the differential will backup multiple days’ worth of data since the last time either the archive bit or modified time has been set.
Also note that you really should not do both incrementals and differnetials in the same backup configuration.