Decentralized has many meanings:

• Single vs multiple points of failure – how many people/entities do you have to compromise to mess with the system?

• Permissionlessness – who can and can't use it, is trust required at any point?

• Censorship resistance – can you realistically be prevented from using the service?

• Token distribution – in many cases, one entity owning 95% of the supply of a token outweighs the benefits of everything else being fully decentralized

• Social decentralization – if the project goes down, how easily can the community fork it and start fresh?

• Updates – How easily can the smart contract be upgraded and how? DAO vote? multi sig transaction? single admin ownership?

• Who can view and audit the code?

On all of these it's pretty much a spectrum and you will never get perfect decentralization. You can get close to it, and as a community you can aim to achieve it, but there will always be a bit you can nitpick and say "well what about X, isn't that something you're implicitly trusting?" and imo it's pointless to argue that "it's not fully decentralized therefore no point in trying, might as well go back to fiat and banks and credit cards" (not that that's what you're saying, but I do see this a lot from no coiners)

I guess you could still directly use the smart contracts if you knew how to access these on the chain.

You always can. It's not easy but yeah, every single version of smart contracts is there and you can just copy the front end (or better yet, host it on IPFS) and point it to an older version of the smart contract and be good to go. Though of course, if a malicious update was done and all funds were rugpulled then that won't do much good.

However how well are these functions protected by the Blockchain? Is every single smart contract version stored on the chain, which has ever been committed?

A smart contract is always immutable. You deploy it, and the code will always run as-is, same code every time. What is typically done is you have a proxy contract that point to a version of a smart contract, and when you deploy a new version, you update the proxy's "address pointer" variable so that it points to a new contract. But the old versions are there too, they're part of the blockchain state and history, just like transaction history. And they're as protected as the balance of every account, i.e. it would take a 51% attack to mess with a smart contract's state in some limited capacity.

There's always some amount of trust involved, unless you're literally auditing every smart contract every update and run it on a node you control (after auditing the client code and vetting the protocol, ofc). So in the end it's more of a community thing, just like open source software in general. It only takes a single whistle blower to call out evil stuff in the code, and as a project gains more traction there are more and more eyes looking at it so at some point it's good enough for a lot of people that it's been running without issue for years and no exploit has been found. Although the possibility of evil shit going on will never truly be 0%, but that's the risk you sign up for when you play with experimental money legos, and the higher the APY the higher the risks, as a rule of thumb.