That will create a backup of the vms project (vf) file, including all its references to media. But that won't create a backup of all files used in the project (vf project file, media files, etc. etc.) To do that is a more complicated configuration management question. I've got a bit of background on that subject as a former project manager.

I would suggest you document your strategy for managing your projects. For example, one simple strategy is to put all project source in one folder. (not the most efficient method, since it will cause you to have to duplicate files that are used across projects, but it is the simplest, most straightforward approach). Then make periodic backups of that folder. (Whether or not you care about backing up "temp" files, "sfk" files, etc. is another question - you'll have to manage your VMS settings accordingly, depending on what you want to do there).

I use a more complex config mgmt approach that involves storing both project-specific files (in the project folder/sub-folders), and shared cross-project source (such as common effects, sounds, etc.), as well as my guidelines regarding what files are project-specific vs. shared, what everything is named, where they are stored, etc. Again, I've documented that approach, including how to archive and restore old projects, so that I don't lose track of references to media outside of the project folder and so forth.

How you back up can vary - straight copy (difficult to keep track of "incremental" changes, so the safest way is a full copy every time, very space-inefficient), or use some approach to identify incremental changes. Simple ways of doing that: winzip has a "update and add" feature that can do this, or you can make a windows "briefcase" of your project folder(s), and sync-update them.

Bottom line, think through your approach of how to create, store, backup and archive projects, and write it down. It's worth the time spent, since it can save you leagues of confusion and mess-ups later on.