For example, most of my computers have the OS, software, and data files in the same C: partition of the same hard disk, and so all of that is taken care of when I create a system image. It depends largely on where you normally keep your data.

Regarding what to include in the backup, the simplest setup is to keep everything–OS, programs, and data–on the same Windows partition, but there are many ways to do it. If and when the time comes to restore a system image (usually because of OS software corruption or hardware failure of the drive that contains the OS), you would insert the Macrium rescue disk and connect the external drive containing the system image, then reboot into the Macrium rescue disk. So your complete Macrium Reflect setup will have three components: The way I do it (and, I suspect, the way most people do it) is to create the Macrium rescue media on a CD or flash drive, and create the system image on a separate, external USB disk.