You should back up your files periodically and keep large backups off-site (it’s a computer lingo for “a place that’s far from your computer, so that floods and fire doesn’t take both your backups and your computer all at once”).

Windows 7 backups fall into these categories:

• Data backups; are partial copies of your files. File and Folder Backup Wizard is used to make copies of selected files and folders.
• Shadow copies, in Windows 7, it makes copies of your data files automatically. 
• System restore points, it makes copies of computer’s important settings, drivers, and certain vital system files. Windows 7 always creates a system restore point each day or before installing new software.
• Image backups (system images) are snapshots of your drives. 

If you install Windows Home Server PC in your network, you don’t need to worry about backups. It takes care of everything – image backups, shadow copies, and the whole nine yards – overall it’s superior to Windows 7 in backup capabilities.

If you have high-speed Internet access and don’t mind uploading/downloading hundreds of gigabytes of data, consider backing up your files to the Internet. A few companies are entering the online backup business, including, notably, Google with its online storage service, GDrive.

Benefits to storing data online include being able to download your files from anyplace as long as you can go online. All your backups are located offsite, by definition, so only a global cataclysm can destroy your backups and your computer simultaneously.

Drawbacks of online backup; obviously include the availability of a fast and stable Internet connection. It should also provide super-tight security (both technically and legally) and redundant storage location, to ensure the safety of your files.