Hi Mike,
If someone just tells me "yes don't worry it will be backed up" that is
good enough for me. I don't need to know the tech behind it. Lol.
See and it wasn't good enough.

I personally think we will all be happier
computer users if we know what is going on with the computer, at least a
bit.
As I said, the Main Identity folder is inside the Office 2004 Identities
folder. The Office 2004 Identities folder holds a separate folder for each
identity that is set up in Entourage. If you only have one identity, it is
named Main Identity by default. My use of "Main Identity" is equivalent to
Matt's references to his Identity folder. Help has a nice "About Identities"
topic that explains more.
Inside the Main Identity folder are several files: Rules, Signatures,
Mailing Lists, and Database. You will notice that Database is probably the
only one of significant size. Entourage holds all your info in a proprietary
database format--only Entourage knows how to go into the Database file and
access the info stored there to show your emails in the correct folders with
the right categories, etc.
Database Utility is a little app within Office, designed solely to support
Entourage. It checks your database for corruption, and has the capability to
compact and rebuild the database. Obviously, since Entourage depends on this
database format, the health of the database is what really preserves your
info. Dropping "database" into Help will return several relevant topics
which will explain more, and will explain how to do what Matt suggested
(e.g., "about the entourage database", "about database utility," "check the
integrity of the entourage database")
Backing up the MUD (MS User Data) will catch everything. In my case, since
my Office 2001 identities and my random other identities for Office 2004 do
not change very often, and don't have anything important in them anyhow, I
personally don't need to take the time and space to back up the entire MUD
frequently. Backing up *only* the identity folder that I use regularly is
plenty for me. This all depends on your backup routine and your personal
preference. If I had a huge external hard drive, I would probably only copy
all my data files to it every month or so, but I like to back up my Main
Identity folder every few days.
Daiya