I think the easiest way to define the differance between the two is by example. A downladed and INSTALLED driver would certainly be a part of the OS, but things like records made using Quicken, music or video files, documents adn the like, are all considered your data files. You can always re-load MS Word, but the documents you've created in Word obviously won't come back if lost.
Oten times, people only care to back up the data files that cannot be replaced, or would be difficult to replace. Other times, people want to make a perfect mirror image of not only their personal data, but the entire OS including all drivers and settings. In that instance, the programs these other fellows are talking about, (such as Norton Symantic's Ghost), would be the way to go, as it is necessary to back up all sorts of hidden system files and the like. It is also required that they be re-loaded properly, or the machine simply will not boot up and run.
If you've got a few dollars to spend, I'd suggest an external HDD to back up your machine. It's quite fast, adn you don't have to worry as much about media quality and the like. I've lost some files due to poor media, and my own stupidity in not making redundant backups, and LOVE my external firewaire drive now. External drives are also available in the USB 2.0 format. The only downfall there is, you have to have SOME sort of OS loaded already to access the drive.
It sounds to me, like what you're asking is how to back up the entire OS as well as everything else on the drive. If that's the case, as I said earlier, a drive cloneing utility such as Ghost is what you want to use. PLEASE remember, unless you've made two copies, it's not REALLY backed up.