I disagree with silvyus_06 to this extent: Hard drives fail. Laptops get stolen. Therefore regular backups are good. Baring hard drive failures and stolen laptops, though, silvyus_06 is pretty much on point.
Linux is not Windows. It's not subject to the same problems as Windows.
Linux does not have anything like the Windows "system restore" because it doesn't need it. Linux does not use anything like the disastrous kludge that is Windows registry. Generally, a software installation that misfires in Linux does not commonly destroy the installation; the most common result is that the new program just doesn't work.
Linux configuration files are text files. With a very little bit of study, you can learn which ones to back up to external media. You can often boot to a live CD and fix them if they go awry.
Windows has system restore because it comes by default with a "system trash" function.
The files I routinely back up when I change them or when I'm reinstalling, in addition to the unhidden contents of my home folder, are these:
/etc/samba/smb.conf, the Samba configuration file
/etc/rc.firewall/rc.firewall (if I'm using an rc.firewall
script--with some distros I use the Firestarter
These are files I worked hard to understand and don't want lost.
In my home folder, I also back up these hidden folders:
/.opera folder, because I use the Opera
browser and that contains my Opera configuration, mail store, and lots of other good Opera stuff.
/.pan2 folder, because I use Pan
for newsgroups, and that contains my Pan configuration.
/.fluxbox, because I use Fluxbox
for a window manager and that contains my Fluxbox configuration.
I also back up my personal template file from Open Office, because I spent half a day fixing it up and don't want to have to do that again.
In short, I back up the configuration files and folders that I have customized, plus data that is important to me. I don't back up stuff that would be recreated on a reinstallation.