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Everyone knows that backing up your data is not just a good idea but absolutely essential to protecting against data loss. Lightroom's catalog backup function is an easy way to automate the backup of your working catalog.
The great thing about Lightroom's catalog backup function is that it is kind of a set-it-and-forget-it configuration. Once you set the backup interval on the File > Catalog Settings > General dialog box, you will get prompted every time that interval passes. Just click the Backup button, and Lightroom does the rest.
The backup that Lightroom creates is simply an exact copy of your working catalog at that point in time. Every time Lightroom runs a backup it creates a new copy. It never touches the old backup copies. Over time you can have quite a few backup copies taking up disk space.
The purpose of the catalog backup is to provide you with a good copy in case your working catalog ever becomes corrupted. You just swap out the bad catalog file with the last good copy and pick up at the point that copy was created.
Hopefully you'll never encounter that situation, but meanwhile Lightroom is continuing to create new backup copies on the interval you configured. It is up to you to manage those copies and keep them from taking over your disk. Periodically I go to my backups folder and delete all but the last two or three catalog copies. If you haven't done this recently you may have a good chunk of disk space waiting to be recovered.
The default backup directory is inside the Lightroom folder alongside your working catalog file. You can change that location when Lightroom prompts you to run the backup. Just click the Choose button and navigate to a different location.