iTunes creates backups of settings, downloaded applications and data, and other information on iPhone. You can use a backup to restore these items to your iPhone after a software restore or to transfer the information to another iPhone.
Backing up iPhone or restoring from a backup is not the same as syncing content and other items (such as music, podcasts, ringtones, photos, videos, and applications that you download via iTunes) with your iTunes library. Backups include settings, downloaded applications and data, and other information that resides on iPhone. You can restore these items from a backup using iTunes, but you may also have to sync your iTunes library content again.
Applications downloaded from the App Store are backed up the next time you sync with iTunes. Afterwards, only application data is backed up when you sync with iTunes.