While doing random things on the Internet I saw an ad for Carbonite online backup advertising unlimited storage. Instantly I thought there must be a catch. After quite a bit of searching I found it. They limit your backup speed to insanely slow speeds compared to any other type of backup. The first 35 GB will likely take 2 full days with good broadband internet if the computer is left on overnight. The next 165 GB will take a full month or more on broadband that is working well the whole time. After the first 200 GB the backup speed will be limited to about 30 GB per month. With all those calculations, backing up 500 GB of data on a perfect internet connection will take over 10 months.
Now let's compare that to a local backup. With the current price of hard drives, it's easy to get a 1 TB (about 1,000 GB) hard drive for $60 or less; that's the yearly rate of Carbonite. For the first year you get 1 TB if you buy your own drive, but for the same price Carbonite will give you speed enough to get 1 TB uploaded in about 2 years and a month! If the price of Carbonite doesn't change then you would have paid $120 and risked data loss because your data wasn't yet backed up. The transfer rate of a hard drive (connected via SATA or eSATA) allows 1 TB to be transferred in about 3 to 4 hours while you are still using your computer.
Windows 7 has a built in backup tool that allows you to schedule backups; you don't need to pay for extra software! If you are using a laptop just plug in the drive each week to run a backup. If you have a desktop computer you can just keep the drive plugged in. If you don't need 1 TB then you can get a smaller drive or even a flash drive for cheaper.
If you are worried about fire, water, or theft then there are drives that are a bit more expensive, but will withstand fires and floods. Some external hard drives have the option for Kensington locks that you can attach to something that isn't easy to move.
Carbonite provides unlimited backup, if you wait years for it to transfer. You can spend $60 a year to buy a new hard drive each year with transfers that take seconds instead of many days.