How about the other option: Backup to a website? How is it done?
Well, I know my techie friend does daily backup automatically to a website and weekly and at random to an external HDD and monthly to several DVD's. But that's what he does for a living. Lots of clients' files he cannot afford to lose.
This question should probably be moved to a different topic, as it is completely non-related.
However, I'll answer up: internet backup services fall into two basic categories:
1) For the home user. These services are cheap (or even free), but much like Google or Yahoo, do not offer much in the line of guarantees that your stuff will always be there. There are low odds that their storage server with all your backups on it will crash at the exact moment you need them... but you need to understand that with most things in life, you get what you pay for. Also, the transfer speeds for a free or cheap service will be much slower - as bandwidth costs $$.
2) For the business user. These services tend to run $0.50 - $1.00 per gigabyte of storage space,
per month. They can become extremely expensive very quickly. On the flip side, what they're offering is a superior service, guaranteeing that your data will not get lost and that you will have speedy access to it.
On to your actual question:
how is it done?
The basic idea is pretty simple. You create an account with them, and then download and install their backup program. It runs at prescheduled intervals, and uploads changes to any files that you have pre-selected for backup to their servers. (The more files, the longer this can take. Days or even weeks for the free services.)
Then, when you accidentally wipe out one of those files, or your computer crashes, you simply tell the application to restore file xyz, and it downloads it off whatever server the file(s) was stored on.
I am unaware of any of the home user / cheapie backup services being able to any type of disaster recovery - that is where you put a CD or DVD into your computer and it pulls everything it needs off the internet to put your computer back exactly as it was when you last backed up. The cheapie services are intended solely for Word documents and your photo collections.