Hi Tech7 and welcome to the SevenForums.
System Repair Disc is something you (hopefully never!) need when things go really bad. It is a good idea to create a repair disc, though as it self it has nothing to with backing up your system.
If you read through these forums, you notice that a lot of users are using third party solutions for their backup needs. I am one of those who trust MS and Windows 7, I'm using the Windows 7 Backup. I've been extremely satisfied, it does what it promises.
System Image is a practical tool when something happens and you have to completely reinstall your system. It contains the whole Windows 7 hard drive, including all the files, folders, applications and software. Restoring a system image returns your computer exactly like it was when image was created. Personally I use system image as my main backup system, as told in tutorials here
Backup is a bit more flexible letting you to choose what to backup. You can easily change settings adding files to a backup or removing them.
Both System Image and Backup functions can be fully automated.