In a previous life, I was a Unix system engineer for a major organization, and my job had a significant user support component for not only servers but PCs as well. The question is not whether or not you're ever going to need to restore from backup, but when.
If you don't have the backups, you will lose your data. Think about it... All your email addresses, everything you've written and "archived" on your PC, your Quicken accounts, your irretrievable, incalculably precious photographs, EVERYTHING, will be lost if you haven't got a backup WHEN, not "if," your hard drive goes into the dumpster.
Oh, sure, you can go to a sector-by-sector recovery firm and maybe, just MAYBE, get some small percentage of it back, weeks later at a cost of maybe $3,000, but wouldn't it be easier just to back things up?
I no longer do full system/data backups. It's really only necessary to retain the following:
1. Your Windows and all you initial driver distribution disks for all your hardware.
2. Every application distribution disk you might wish to reinstall. You should also save downloaded application distributions to CD just in case, although it's usually better to download and install the most recent versions after you restore your O/S and connectivity.
3. Periodic printouts -- on actual PAPER, because all your saved data will be gone -- from Belarc Advisor (for an overview) and PC Wizard (for more richly detailed information -- what a WONDERFUL app!) so you can reference the actual state of hardware and software installed on your PC.
4. Your ENTIRE "My Documents" folder saved to disks.
5. A copy on CD of those folders out of the "Application Data" folder that cannot be easily recreated, like the one where your email data is stored and your web browser bookmarks/favorites. Most of the folders in "Application Data" only contain "Preferences" configuration information that you can easily redo after recovery, so you don't need to keep these, although they're usually so small it's not really an issue. Others, however, like some picture sorting apps, contain large indexes that might cause complications after reinstall. It might actually be BETTER to leave these off.
Twice on my present computer (and innumerable times on the computers of others) I have had to restore from backups. First I restore the system and drivers from initial distribution, and update those as needed to the most recent versions. Then I restore the applications, from distribution if I purchased them, and then update to current from their internet sources. I then restore my most essential internet-sourced applications (like Eudora and Firefox) in their current versions, and I leave off those applications I installed but then found that I never actually use them. Then I restore my data, first the "Application Data," and finally the "My Documents," from CDs. Finally, I re-download and reinstall my enormous host of "auxiliary applications" over the internet in their most recent iterations (Belarc Advisor is so nice to provide me with a list of all of these things I'd installed previously!).
Admittedly, this method makes restoration more time consuming and difficult to complete, but the end result is vastly superior for a number of reasons.
1. If you restore from a complete backup, you will get everything back just as it was but with all the accumulated cruft (and potentially even malicious code which may have caused your crash in the first place, and corrupted files with their corruption intact) that you've loaded your system with over years of use. When you restore from distribution, you get clean installs and your computer runs like new.
2. You get everything you download in its the most recent version without any unwanted, system-draining remnants of previous releases.
3. Through the refreshment this does to your own human memory, you get a permanent better sense of what you've got, where it is, and what you really need. It makes YOU a better geek!
Because my computer is (how shall I put this?) rather mature, it takes me several days to complete the whole procedure, although my computer becomes usable for things like email and web browsing within only a few minutes of restoring the O/S, drivers, reconnecting to the internet, and installing and configuring the email and browser apps -- a matter of a couple of hours.
It's a pain, sure. But so's any other way, and this leaves you actually better off in the end than you were before the crash.