I keep a second external drive for backup, discs can become scratched and fail, and HD's are super cheap nowadays, I saw a 1TB drive for less than $200 yesterday.
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Backing up to double-layer DVD's is certainly better than having no backup but it's a fair amount of work to burn the discs, keep them organized and to restore them if you have to do that. If you're going to do it that way I'd suggest you make two complete sets and keep one offsite.
As Kennyt says, hard drives are really cheap now, I've seen 1TB drives for even less, around $125, and you don't need to go to the trouble of setting up a RAID array to have an effective backup.
I have an external drive of the same capacity as the one that holds my music and use the application 'SuperDuper' to clone my regular hard drive by plugging in the external one every weekend and doing an incremental backup. After the initial copying of the drive it takes only 10 or 15 minutes, depending on how much music I've added over the week. There's always the risk of losing one week's worth of music but redoing that amount of work isn't very scary. I'm paranoid enough that if I leave town for a few days I put the external drive into a fire-proof safe in my basement.
I bought a Drobo and Drobo Share which is basically infinite storage with self-contained back up. I have pathed my iTunes there, and it currently has 4TB drives in it. That gives me 3.2 TB of storage, and backs it all up. If any of the drives fails, Drobo tells you to replace it, and you just plug in a new one. I don't back anything up past this, because it backs it all up internally. Really a great invention.
I use a Cavalry 1TB external HD ( mirror back-up system). It wasn't cheap, about $450, but all of my iTunes library is backed-up on it and sitting on the shelf. Since the entire library is also in iTunes on the iMac internal HD there is no need to keep the Cavalry hooked-up. Once the library exceeds the iMac internal HD it will be necessary to make choices as to what stays in the iMac and what is listened to only when pulling it from the Cavalry. My library is about 525 CDs strong and growing. Since getting the Cavalry I no longer burn back-up copies of CDs.
Don't count on DVDs, especially dual layer dvds. In my experience, (i owned a prepress service business, archiving gigs of data every day for clients) average off the shelf DVDs had a pretty high failure rate, around 18% when stored in jewel cases in a climate controlled environment for 1 year. Dual layer were worse. I did find however that archival DVDs (single layer Mitsui gold to be specific) stored as above have had a 100% data retention rate thus far. At more than a dollar a pop when bought in bulk they're not cheap, but a decent option. Still as stated by others, an external hard drive is your simplest if not least expensive option.
Not if the external drive fails and needs to be replaced. Also, you are limited by the size of the drive you are backing up. You use the Drobo as an external drive, it has virtually no size limit, and acts as it's own back up, no need to use additionaly software to back everything up, and no need to take up any other disc space with it.
I don't know where to start with this. The Drobo does not even include hard drives and it costs $400. You still have to install the hard drive(s) of your choosing so why mention "Not if the external drive fails"? You'd be choosing brands/makes/models of hard drives just like you would if you bought an external hard drive without a Drobo. Let me say this again for anyone not familiar with Time Machine. This is how easy it is. The very first time you plug in your hard drive to a usb or firewire jack a dialog box will come out asking if you would like to use this drive as a backup drive. You click yes AND THAT IS ALL YOU EVER HAVE TO DO. There is no messing around with software or anything. You can go into preferences and choose the time of backup and what folders/directories you'd like to backup if you don't want to backup the entire machine but that's about it. And it's FREE. It comes with your Mac. The Drobo may look nice but it seems completely unnecessary.
Synthfreak, I own a Mac and I am well versed in Timemachine, Drobo is not backup, but redundant storage. It's not cheap initially, but in the long run as external drives fail, as every one I have had over the years has, it is MUCH cheaper. SATA drives, which DROBO takes, are extremely cheap and continue to fall in price with every larger capacities. As an example, if you put in (4) 1TB drives you will get approx 3.2 TB of storage space, and all of it is backed up on itself and secure. If 2 or 3 of the drives were to fail at once, you still have all of your data. If all 4 of your drives were to fail at once, there is something majorly wrong and you have bigger problems than data storage.
If you want to keep your iTunes secure, I know of no better way to do it. Also, if you have a very large collection you don't need to go to a RAID area to mirror 1 TB plus drives, or use the HD on your computer at all. iTunes allows you to easily path the library to the Drobo where it resides for all time without taking up any space on your computer. If any of the drives fail, the Drobo tells you to swich them out, and they are hot swapable.
Once again it's not a backup, it's a way to secure your iTunes, or any data file for that matter, without having to have mirror data files.