I'm about to dive into the world of offsite backup. The service I use recommend that I backup just my user folder. Would this be enough to restore my system to it's original if there's something wrong with the computer? I want a backup of all the app settings, including system settings etc not just my documents.
To be safe, and assuming bandwidth/storage space is not a big issue, I would recommend backing up everything. A good argument could be made that you don't always need all of it, but unless doing so would cause great inconvenience to you, it will probably be worth it to have the additional security of knowing everything is recoverable. There ARE files outside of just your user directory that even a casual user could find important. Many settings/preferences, application support files, etc. are stored on a higher level than your user directory.
That being said, folders outside of your user directory probably do not need to be backed up as frequently as the ones inside it, so you could probably get away just fine with backing up the system folders, say, once a week, while your user directory should be backed up daily.