Windows 7 Backup - Does the "system image" include all the files on my drive?

The system image will create a full copy of every file on your boot partition, which can be restored from the recovery console on the installation disk. This will restore everything, including the operating system, registry, all installed programs, and user profiles. The separate option to back up specific folders and files is necessary if you want to be able to restore individual files. The "previous versions" feature and the ability to restore just specific files requires that you back up those directories. If you only intend to ever use the restore features to do a full image restore, you don't need to select anything on C:, however, I have found it useful in the past to be able to recovery just a single file or directory of files, such as in the event of an accidental deletion, etc.

Both Of these options come from Windows. There is the Backup and Restore and System image. to be on the safe side, I recommend that you use both of them and let me explain. I'd use Backup and Restore if I accidentally deleted a file during my computer use since you can pick separate files from a backup, I'd not use this if there's a hard drive issue and I needed a new computer. Its a good way to protect data from accidental deletion rather than being a base for a bare metal restore

Now with the System Image you cannot select separate files and this is what I would use if there is ever a hard drive issue and needed a new computer. It replaces your programs, settings (Program Settings), files, and it is an exact copy of your hard drive as if nothing happened.