Time Machine is the automatic backup program built into Mac OS X. It keeps an up-to-date copy of everything on the Mac — digital photos, music, movies, TV shows, and documents. Ideally, the Time machine backups should be stored on a separate hard drive, either an second internal drive or an external hard drive.
By default, ALL files are backed up. See the entry below on how to set up #exclusions.
Tips and Troubleshooting
By default, Time Machine will back up the hard drive every hour. This can lead to some overall slowness if Time Machine is constantly running backups on a heavily used machine since it is constantly accessing the disk during backup. The interval can be changed using the following command in Terminal:
sudo defaults write /System/Library/LaunchDaemons/com.apple.backupd-auto StartInterval -int <time>
where <time> = seconds
A free, third-party GUI interface is also available to modify default settings: Time Machine Editor
Deleting objects from Time Machine backups
Open time Machine. Go to the top level - the first window; the one with your hard drive. Navigate to the backup you want to delete and use the Actions menu (gear icon) in the Finder's toolbar. It has an option to delete the backup. Also, when using the Actions menu, with a file or folder selected, there is an option to delete all instances of the file/folder from all backups.
Excluding files from the Time Machine backup
Open Time Machine's System Preferences panel, click on Options, click on the plus sign, select the folder or file you're concerned with in the dialog box, then click Exclude.