The Plan for New Backup Users
If you're a new user, you'll want to configure a Plan for your first backup. You can do this by going to Plan -> New Plan... at the top file menu or by clicking on the + symbol in your Backup menu of plans. You'll be presented with some basic options for creating a new plan. I recommend that you start with Personal Data & Settings. This covers the basics, such as your Address Book database and iCal calendars. You can add other files to this Plan once you're up and running. Once you pick your starting plan, and double-check that it's backing up to the location you want, click the Back Up button and the process begins.
Apple provides some useful Plan templates as a good starting point for new users
Here's another tip. If you don't like the name "Migrated iDisk Plan," just click on that title and you can enter whatever name you want. If you want to remove a plan from the Backup window, just click on it once and hit the delete button.
Preserving Downloads Purchased from the iTunes Music Store
We've been able to back up to optical media for some time now, but the process never seemed as easy as it should be. That's changed in version 3. You have pre-configured options for backing up your purchased music, or even your Home folder.
I think the purchased music archive is particularly important. As you know, once you've paid for a song and downloaded it, that's the end of Apple's responsibility. If you somehow lose the music file through a hard drive crash, you'd have to buy it again. Backing up these files is essential.
Launch Backup 3 and click the + button in the lower-left corner to create a new Plan. Double-click on Purchased Music to open the detail menu that shows "iTunes purchased music" in the items list with the amount of data that needs to be backed up. In the Destination and Schedule window, you'll see "Monthly to CD or DVD at XX:XX time on the XX day of the month." If you want to change the schedule time, just double-click on the DVD icon to reveal another detail menu that gives you those options.
Once you're set, click the Back Up Now button and your Mac will begin the process by asking you to insert a blank CD or DVD (depending on how much music you have). Click the Burn button and you're on your way.
Backup 3 creates an archive file and burns it to disk. The disk title becomes "Purchased Music" with the date and time of the backup. When you open the disk, you'll see a Backup 3 archive with a similar title. The solid orange umbrella top icon indicates that you have a full backup. (If the umbrella top was segmented, that indicates a partial backup.) If you double-click on the file, it will launch Backup and take you directly to the Restore menu.
Your purchased music is now stored in a Backup 3 archive that is timestamped and burned to a DVD
Backup3 suggests that you perform a purchased music backup once a month. For most folks, that should be often enough. But if you find yourself in the middle of a buying spree on the iTMS, you may want to run a backup right afterward--just to be safe.
Also note that these are single-session burns. So even though you might not use all the disk space during any given session, you can't add more music to that disk later. You'll have to start with fresh media.