The iCloud, like any cloud service, has the main purpose of syncing all your contacts, calendar, notes, reminders, and mail across all Apple devices. (Also Pages, Numbers, and Keynote documents if you have any). This is the best and main purpose of iCloud. To see what actually automatically syncs, you can go to iCloud.com from any computer and see for yourself.
The iCloud also has an optional "iCloud Backup" that literally backs up your entire system. (this includes app data, game data for some 3rd party apps, pictures; stuff you dont see on icloud.com). I dont like/use this feature because iCloud backup has limited space, and my backups are fairly large. I would suggest leaving iCloud backups off, and backup you data in iTunes (which it does automatically every time you sync it). iCloud backup is just a way to have a full system backup and not need a computer to do it.