I upgraded to a paid version of Macrium Reflect to get the ability to do incremental and differential backups. An incremental backup contains only the changes since the last full or incremental backup. As kado897 warned, all incremental backups have to be present along with the associated full backup for recovery to occur.
Differential backups are similar except the backup is of all changes since the last full backup. All that needs to be present to do a recovery is the full backup and the latest differential backup which means you need to keep track of fewer files since previous differential files can be deleted. The downside is each differential backup contains more data and takes longer to make.
I've found the easiet way to make sure all associated backups stay grouped together is to first make a folder on the HDD I'm storing the backups on, then direct the backups to that folder. I use a new folder every time I make a full backup. To make keeping track of what is what easier, I let Macrium Reflect name the backup file with the default name it assigns. I name the folder with the date of the backup and the XML file with the same date using a year-month-day format for chronological self sorting. This way, all associated backup files stay grouped together and I won't accidentally delete any needed incremental files when making room on the HDD for the next backup folder.
Btw, Macrium reflect uses images of the HDD being backed up instead of just copying files directly. A recovery disk is needed to restore data to a HDD (Macrium Reflect has a provision to let you easily burn your own).