I encrypt about everything. Laptop, server, backups, external hdds that are just for me. (Only thing I don't encrypt is a VPS. It's hosted on somebody else's hardware and they'd be able to break the encryption anyways if they wanted.)
I just put LUKS on it before formatting a filesystem. For the OS I use the good old approach with LUKS and a LVM inside.
I mean if you don't encrypt the backups, the encrytion of the system is kind of meaningless, isn't it?