I recently installed a backup program from Paragon that wanted 35Gb for a backup despite the fact that I can copy the entire My Pictures folder onto a single 4.7Gb DVD. Where has the extra space gone?
There are two different kinds of backup. One is to copy files one by one and the other is to make an exact copy of the hard disk. Copying files only requires the amount of space the the files take up and some backup programs can reduce this using compression. You can make this type of backup manually as you describe by copying folders onto a DVD or external hard disk. Dedicated backup software, such as Comodo Backup, can make incremental backups where only the files changes since the last backup are copied, which can save time and storage space.
These backups make sure that documents are safe but an exact copy of the hard disk saves time if there is a problem with Windows. The copy can be restored to the hard disk, returning it to the exact state it was when the backup was made.
The ideal is to use both kinds of backup. This 2-factor approach means that you can recover single files, or the whole hard disk if you need. The exact copy of the disk only needs to be made every few months and the file copy backup more regularly.
I hope this clears things up.