Win 7 Backup and Restore is actually two program classes in one.
You have the system image backup which is copy of everything on the partitions which you select and stored in a VHD format.
You also have a folder backup which produces an incremental backup of your selected folders stored in ZIP format.
This is a very general overview. I strongly recommend reading the tutorial by Brink on Win 7 Backup and Restore: Backup Complete Computer - Create an Image Backup
I use Win 7 Backup and Restore-very successfully.
I am a strong advocate of Win 7 Backup and Restore.
The image backup is not an incremental backup but rather a fresh image.
The one characteristic of Win 7 Backup and Restore which I would like to see changed is that the new image backup overwrites the old. Thus you must rename the old before making a new if you want both. Brink explains this in his tutorial.