But if I were to change '~/backuptest' to '/var/www/html' would it replace all of the files in there that are outdated?
Yes. using the --delete option, as you are, it will also delete any files it finds in the target which do not exist in the source location. If this is preferred, additionally you can add the -m option to prune empty directories as well.
So if you want to keep what's in /var/www/html on the system running this command, I would recommend backing the contents up to a different directory prior to attempting the above.
lsync is essentially intended to automate the process of directory synchronization. If I understand it properly it's slightly better than running your command in cron every so often as it will monitor the directory and perform synchronizations more quickly when changes do happen or not run an unnecessary rsync operations when changes haven't happened. The google code page summary also specifically states that it was designed for low profile of expected changes, e.g. contents where a few files here or a new directory there happen rather than large sweeping changes on a regular basis.