If you have an external HDD in a USB and/or Firewire enclosure, you can make a backup of your system to this drive and can boot from that device when the worst case happens (e.g. your internal HDD crashs). I am using SuperDuper! for the backup, but there might also be other programs that do the job pretty well, e.g. CarbonCopyCloner (CCC). SuperDuper! worked best for me and is working in limited mode free of charge (only full backups are possible). If you decide to support the author by investing about 30 dollars, you will be able to save a lot of time and do incremental/diff backups.
I split my 250GB external HDD into two partitions: one has 80GB (called “Backup HD”) and is formatted with the HFS+ file system. This is the partition where you put your backup on. The other partition (which I named “DATA”) takes all of the remaining space on the hard disk (formatted with the FAT32/DOS file system), I use this partition for transferring data between other Windows or Linux computers.
Although the backup was created successfully I was unable to boot directly from the external hard drive when I still had my PowerBook G4. Now that I have an Intel Mac, I decided to re-format the external HDD and made sure I chose GUID as partition scheme. This makes the drive bootable for Intel Macs and readable/writeable for Macs and [the DATA partition] also for Linux/UNIX and Windows computers.
After running a full backup with SuperDuper! you will be able to boot from the external drive if you hold the Option/Alt key when the gray Apple logo appears during startup.
If the worst case happens (your internal drive crashes) you will be able to work with your system running on the external HDD and can restore the backup to a new internal HDD using SuperDuper!. Just choose the external drive as source and the new internal drive as destination drive.