FolderShare is a probably the most unheard of all Microsoft Live offerings. However, in my opinion FolderShare is one the most useful service.
FolderShare allows users to create a private peer-to-peer network that helps them to synchronize files across multiple devices and access or share files with colleagues and friends. One can sync files as big as 2 GB and there is no limit on the number of files that one can transfer using FolderShare software. Thus FolderShare is the ideal backup solution if you more than one computer. Just choose the folder that you want keep in sync or backup on your main computer and then choose a folder where you want to save the files on the other computer and FolderShare do the work for you.
SkyDrive is great if you want to share files with multiple contacts and also if you are looking for a place to backup you data on the cloud or have only once computer.
Windows Backup is an ideal solution for people who want to back up their whole computer (or a whole drive). This will make *.vhd image of the hard disk and you can save it on CD/DVD or an external hard disk or on a network drive. However you will not be able to use the files from the backup unless you restore the files.
You will also need to schedule a backup to run every few days so that you have the latest files in the backup. Each backup that you create will take space (there is no incremental backup functionality yet) and you can set rules on how many old backup copies you want to retain.
FolderShare is perfect if you want to create backups of folders and want to use the files from any computer that has these and keep all the sets in sync.