Generally, it's simply important to _have_ a fairly recent backup. While reinstalling OS X and reinstalling all applications can be a hassle (and consume some time), I usually think it's enough to simply have your home folder(s) backed up, because a re-installation is also a chance of getting the "dust out of the system". Your home folder will still contain all the settings/preferences for your apps, even if you re-install them.
I use LaCie's SilverKeeper. While it doesn't sport a really nice UI, it does all it should and works just fine for all I need it. Can even do scheduled backups, although I hate those (my notebook *just* might not be connected to that external harddrive at the specified time...) and rather choose to backup inbetween from time to time. Usually on a daily basis, though, because I'd hate to lose work.