Windows Vista Backup

So, for the first time, I am using windows to back up all my information on my PC and not doing it manually. I decided to do it this way because it just seems easier. For those of you who have used this/us this currently - How well does it work? One thing I like about it (As far as I understand) is it just checks/removes/adds files on a X basis. Let me make sure I have this right though -

So, say I have a FLAC music file of a song and on Monday it get backed up. Tuesday I convert it to MP3. Tuesday night, it does a backup. Will it throw out the FLAC copy and add the MP3 copy? Is this how this works?

Also, if you guys use this, how often do you have it backup? Right now, I have it set for every night, which I think is useful. I change a lot of stuff on a daily basis. What about you?