It's not really for backup - it's for versioning. If you save over something, you may be able to go back and recover a previous version.
Windows Backup itself (Win 7 or
is very solid and functional. I've done test recoveries and I've done a real recovery using it - no issues at all. If you don't have an original installation CD/DVD then it will let you make a recovery disk, too.
Many of the commercial options, such as Alan mentioned, can offer additional functionality or may be faster and so on. If you're looking at going to the cloud as well, you might like to look at Crashplan which will let you setup a local backup as well as a cloud one (same backup, two locations). It's one of many options available.