1)Should I back anything up , and how do I do that ?
Yes, always... just connect your phone to itunes and sync it, it will back up all your settings, data, sms, etc.
2)So basically just go to t hat one website on safari and its a done deal ?
Yes, just go to that website, slide to jailbreak and see the loading screen, after it finish it tell you that cydia have been install on the home screen.
to avoid any issues I personally always reboot my phone after a jailbreak or update, reset network settings and reboot again. (this is just me being paranoid, not really required), then run cidia and you'll be done. It will close the first time, just re-open it. (note that since the JB was release yesterday, the servers for all sources are being hammer with users, so you may experience some delays and error, just wait until it clams down a bit)
3)Now that I have Cydia , what can I use for themes , and video game emulation ?
Just search around forums (including this one) you will find endless thread abot nice themes, and must have apps. You can also use cydia by category and find exactly what you are looking for
4)What is a blob ?
SHSH blobs are special files that Apple use to sign the software that goes into your iPhone, without them you won't be able to restore to older (or hacked) firmware in case that is necessary in the future to jailbreak/Unlock (apple will force you to have the newest firmware). With this files the hacker can signed any firmware and allow Itunes to burn that firmware down to the iphone without authorizing with Apples servers
5)Can I use itunes , even if I have jailbroken it? If so how can I do that , do I just not update when it asks me to ?
You can use iTunes same way you always use it, now if a new firmware is release and you want to keep your jailbreak, don't update (just ignore itunes warnings), wait until the new jailbreak is release and follow the instruction (or come back here for more helo them). If you don't care about keeping the jailbreak, because maybe the new firmware have something that you MUST have right away, just update normally with itunes, it will get you a fresh FW and the jailbreak will be gone.
6)Can I still buy things through my phone from itunes without jailbreaking?
You can by anything you want form itunes with or without jailbreak.