There are various ways to do this depending on what you want to backup. The best thing though is to organize your important files so that they are all under something like My Documents. Do not store important files in any Temporary directories (e.g. c:\temp) - this is not a good idea. All your important files will probably then fit on a single CD, if not a DVD. So periodically you should back up those files.

Alternatively you can purchase an external drive - that either connects via a USB port or via the network - and select files/folders to back up using its software. I know that Maxtor has something like this called OneTouch - I've not used it and have read mixed reviews about it. But there are others too. An advantage of this type of backup is that it can often be automated/scheduled.

For a full system backup you can use the network/USB drive just mentioned, or a backup service such as Carbonite. You can then choose to backup just your Documents, all your Programs or everything.

What to backup and how often really depends on your specific needs.