I doubt it actually backs up the music, video, photos, etc -- those things already came from your computer and presumably are on your computer, available to be synced again if necessary. If you consider how long it takes to put all your content (meaning the above items) onto your iPod Touch, the backup is too fast. I think the backup saves settings and data for the OS, and data files for the apps, stuff like that -- configuration data that otherwise only exists on the Touch.
My Touch was acting a little slow recently, so I thought I'd try a restore to see if it helped out (seemed to, a little). After the restore was done and I re-synced, my apps seemed to have all their data back, with a couple exceptions noticed so far: my apps were no longer organized like I had them -- they were all in alphabetical order, and the empty folders in Air Sharing were gone.