Having your data online reduces the risk of losing data from device failure or loss, but it doesn’t eliminate all risks while exposing you to new ways to lose your data as others have mentioned. So while using Dropbox, iCloud Drive, and the like may modify one’s approach to backing up, I don’t see it eliminating the need for backups altogether.
Backups are like auto insurance. Ideally, you never need to use them, but when you do need them, you’re glad they’re there.
iMac has time machine and a CCC bootable backup done nightly - but - my iTunes library is on an external drive - thinking that iCloud music library is secure and or will recover all your music made me a believer in backups - upgraded to Catalina and my iCloud music was doubled because I had over 100K items in my library - finally got apple to admit that apple music does count against your 100K limit which will not change altho purchases do not - in any case having more than 100K items in my library led to over 200K items and over 1K playlists - after several videos and screen shots to engineering I was told over 2 months ago that they would have to reset my iCloud music library deleting everything in the cloud after I sign out on all devices - without my music on the external drive and a backup of that 40 to 50 years of albums digitized and burned cds would be lost - still waiting for them to do what they said they had to do to get my music back but that is my horror story for now - there are others that CCC has saved me many times from as well as time machine helping recover files accidentally deleted easily recovered blah blah - MBP has a similar backup configuration with external drives - I back up my phone to my laptop not the cloud and restore from that backup which is backed up by the other backup methods - just me - like many here!
Maybe backups are still a good idea…
I just had a scare last night. I got an email saying that I changed my billing information on my Apple account. What? I tried to log in, but couldn’t. I called Apple Support, and they led me to changing my password (turns out I could do it on my iPhone). I clicked log out all other devices, and then had to log myself out of my Mac, reboot, and log myself back in. I logged back into iCloud, and noticed all of my desktop documents were gone! And, my iCloud folder was empty too! I had lost everything.
No, I didn’t. After I finished with my panic attack, I looked at the iCloud settings and noticed that documents were turned off. Turning it back on made everything magically appear once more.
Fortunately, I do backup because of old habits.
Backup early and often.
Different kinds of backups protect you from different kinds of problems/threats. At the risk of repeating some of the good words above, here is a distillation:
A clone (snapshot) of an entire volume is a good way to get back up and running in the event that the computer dies completely, and you want to replace it (Apple’s Migration Assistant makes that easy).
An offsite document backup (e.g., Backblaze or iCloud) is protection against having your house burn down or the like (taking your computer and the backup drive with it).
An offsite clone addresses both threats (but is harder to keep current)
A versioned backup (e.g., Time Machine) protects you against a file (or files) getting corrupted and enables you to turn the clock back to a time before the file (or files) went bad.
Snapshots of documents (stored offline) can protect you against ransomware attack.
Multiple backups are helpful for two reasons: (1) You are protected against multiple threats, and (2) even a backup can have a problem, and you have a fail-safe system.
My personal approach is as follows:
The bare drives are ones I’ve pulled out of old, retired computers (and other devices), so for the most part, they costed me nothing.
As far as I’m concerned, there is every reason to backup, and I think backing up is a best practice that everyone should follow.
With the money you spend on iCloud and other cloud storage space you can buy several external hard drives/SSDs. I clone my main drive for quick restores, but when that is insufficient for one reason or another, Time Machine works fine, though more slowly. I also keep an offsite backup in a Safe Deposit box, though it doesn’t get updated as often as it should. Over the years, backups have saved my bacon more than once. When a drive fails or a system is corrupted, a full backup is vital. I backup my data, my system and my apps. Restoring apps from scratch can be tedious and time consuming, even supposing you’ve saved all your serial numbers. My serials are saved in my data backups, for the most part. You can’t be too rich, too thin, or have too many backups. The notion that the cloud is sufficient is deficient. For one thing, restoring gigs of data from the cloud can take days over an average internet connection. Even if your internet connection is fast enough, the cloud may not be. Your backup is undoubtedly on a busy server where bandwidth is at a premium. The only things I save in iCloud are my calendar and my contacts. Even my iPhone is store locally. If I traveled more a backup to iCloud might be useful. aDDFFy music and my photos are on my computer and it’s associated drives—where I can get at them quickly and easily.
Retrospect is still available, just as complicated and effective as ever. I have personally substituted hard drives for tape with great success. (And much more rapid than the astonishing 22 MB/minute of my old cartridges.)
Major point: Dropbox and iCloud are NOT backups, just synchronized data. For enough money, Dropbox will provide backup of your Dropbox data. For iCloud Files, Contacts, Calendars and Reminders, and Bookmarks, iCloud does the ability to restore these items – see the iCloud Settings page for capabilities and caveats. For power users or packrats, iCloud for Documents and Desktop expose one the same risk of Apple changing direction as we have experienced elsewhere. That is why our backups (and my clients) are a mix of Time Machine and Clone backups.
My financial and technical documents have both extrinsic and intrinsic value, are not on iCloud or Dropbox, and are routinely backed up by both local Time Machine and CCC-local and offsite clones.
My SO’s art (mostly decades of photos) is backed similarly to ensure peace and tranquility in the family.
Backup or not? What is your data and your time worth and to whom?
I do think it’s important to note that Dropbox keeps thirty days of file versioning, including deleted files, even for basic (free) accounts. (180 days for professional and business accounts.) You can access the file versions and deleted files from Droobox’s website.
Everything? I think not. There’s plenty of stuff (like the OS itself and probably software purchased from the App Store) that Apple won’t back up. They’ll re-download it on the fly when you try to reinstall everything.
Which can be a problem if you’ve got some software that your purchased from the App Store and is no longer available. I’ve got a few such apps - they don’t even appear in my “Purchased” tab in the App Store anymore. If I lose my local copy, I’m never getting them back again.
Second, that iCloud storage isn’t unlimited and isn’t free. After the first 5GB, which you’ll burn through real fast backing up any non-trivial system, you’re going to be paying Apple a monthly fee for the storage. $1 per month for 50GB isn’t going to break anybody, but the higher tiers ($3/mo for 200GB or $10/mo for 2TB) is not insignificant. You may not want to spend that much, especially when you can get a 4TB USB hard drive for $100.
And, of course, all this ignores the significant amount of time it will take to download everything when you need to restore a dead system. Orders of magnitude slower than a locally-attached hard drive or SSD.
Ow. So you’d better keep your documents where Apple wants to look for them. And you’re still on your own to install and configure system and application software as part of restoring a dead system.
That will work well for avoiding doomsday scenarios. But if all you keep are critical documents, your recovery process will take a very long time. A full system clone adds a lot of convenience - you can wipe your system, boot your clone and then clone it back to your system’s primary storage device.
I personally dealt with this several times over the years. Before I was cloning hard drives, I was making backups to tape. I’d create an emergency recovery system on removable media (floppies when systems were small enough for that, later on things like Zip disks, optical disks and USB thumb drives). The emergency recovery system always includes a bootable copy of the OS, my disk-repair utility apps, and my backup software. In the event of disaster, I boot the recovery system and use it to restore everything from tape.
With a system like that, recovery from backup takes a few hours and leaves your system exactly as it was when it was last backed up. Without that, you need to reinstall the OS. Then reinstall all your apps (hope you have media and license keys available). Then restore your documents. Then have to reconfigure all your system and app preferences (hope you remember where all the important settings are).
Hah! I think Josh was making a joke rather than a strategy suggestion. 
You’re absolutely right—it never makes any sense at all to pick and choose what you want to back up since you’ll always get it wrong. Full-system backups are the only way to go.