you don't need or have to back your whole system up ( although there are programs for this like ghost and acronis ) other new pc's can restore to new condition still saving your stuff
but you do need to save any photo's you have downloaded from your camera. also any downloaded music or files from itunes or napster for example that you've paid for. any documents ie: schoolwork,letters etc,anything of importance. good idea once in a while to save your internet favourites (you'll be lost without them) and any mail addresses and mail
several ways to do this
get an external hard drive, once a week,connect it and drag and drop your stuff in
burn it to a cd/dvd, depending on how much to save
better safe than sorry