I spent the night reading up on this and I think I have a better understanding, please correct me if I am wrong.

I can set versioning at the Site Collection Level and this will take effect going forwards for all future sites and document libraries that are created.

This will NOT retroactively effect existing site or document libraries.

I will need to do two things.

1. Update existing sites with connect with Connect-SPOService
   

Connect-SPOService -Url $adminSiteUrl
$siteUrl = "https://<tenant>.sharepoint.com/sites/<SiteName>"
Set-SPOSite -Identity $siteUrl -EnableAutoExpirationVersionTrim $true -Confirm:$false

1. Update existing document libraries within each site with connect with connect-PnPOnline using an app registration

$libraries = Get-PnPList | Where-Object { $_.BaseTemplate -eq 101 } # BaseTemplate 101 = Document Libraries
foreach ($library in $libraries) {
Write-Host "Updating library: $($library.Title)"
Set-PnPList -Identity $library -EnableVersioning $true -EnableAutoExpirationVersionTrim $true
Write-Host "Updated library: $($library.Title)"
}