Put simply, a backup is a copy of your files, in whole or in part. You can create a backup of one file, one folder or an entire hard drive, and it would be called a backup. You can create backup versions of contact lists, system preferences and more.
It's generally considered a good idea to backup any files that you can't afford (or don't want to) lose due to the volatile nature of digital storage. If at any point your main hard drive fails, the second you start complaining someone is bound to ask, "Didn't you create a backup?"