Dropbox is for syncing, not backup. There is a difference, and people don't care about the difference until they run into problems.

Dropbox doesn't delete your files when you delete them from dropbox. You can always restore them later, I have used that feature countless of times. So Dropbox can act like a backup, I still use JungleDisk to backup my whole dropbox just to be safe.

Depends on what you mean by "backup".

Backup to me (and most others that I've talked to) means "I can restore all my data, my entire hard drive, and be back to where I was yesterday, so if I screw up my kernel tonight, I can just use the backup to revert to my pre-kernel hacking spree".

(to an average joe, it means the same thing, but not as much detail)

By default Dropbox keeps 30 days of old versions. You can pay extra to bump that up to "forever".