My friend, this thread has some nuggets in it, but our friends may have been misled by your question. You see, 400 MB is not very large at all. As one of them pointed out, the standard hard drives for iMacs like yours are at least 80 GB, which is 20 times larger than the size you mentioned.
So, let's start with the most basic question: Do you want to back up EVERYTHING on your Mac? I'm assuming you do. OK, so how big is your hard drive? Here's an easy way to find out: Locate the hard drive icon on your computer desktop (it's probably labeled ''Macintosh Hard Drive'' or something like that if you haven't changed the name). Select the drive by clicking in once. Now hold down the Command (Apple) key and press ''I'' at the same time. This will get you a nice information window about your drive. Look for three things: Capacity (the size of the drive), Available (how much room is left on the drive), and Used (how much data you are storing). Odd thing--your drive capacity is probably some peculiar number like 149.04 GB. this is because drive manufacturers count a kilobyte as 1000 bytes, where your Mac counts a kilobyte as 1024 bytes (annoying, no?). To find out what the drive manufacture says the size is, rather than what your Mac says, add 10% to the Capacity figure, then round down to the nearest 10 GB.
Now that you know the size of the drive, it's time to remember chinajon6's comment about the difference between ''archive'' and ''backup.'' You should definitely archive your most important files on a CD-R or a DVD-R and keep them in a physically separate location (I keep mine locked up at the office). These are files you don't modify often or are extremely important to you (photos, tax returns and irreplaceable mp3s/videos are on my list). You can find some really good instructions on how to burn archive CDs in this thread, so I'll spare you the repetition.
I'm a big believer that all hard drives fail. It's happened to me and it's happened to friends. Since you have an iMac, you can't add a second hard drive physically in the computer that functions as a back up to the first drive, so buying a USB 2.0 or Firewire drive is probably the way for you to go. Just buy one that is at least the same size as the Capacity of your Macintosh drive. Many of these drives come with back up software, so consider this easy solution (make sure the software is mac-compatible!). The instructions are pretty straightforward when you install the drive and the software.
How often should you back up? I back up my precious music files three times a week--at 1 AM on Monday, Wednesday and Friday (I actually have a hard drive that has only music on it and a second drive to back it up). I back up my Mac HD on Tuesday, Thursday and Saturday, also 1 AM. How many hard drive failures have I had? three. In two cases, I got a directory corruption and all files on the drives were lost--the backup worked fine and I lost only trivial amounts of data. The third case? That was my first failure and I lost most of the data--why do you think I back up like a fanatic?