Thanks, all, for your replies.
I guess it just wasn't clear to me that apps data is included in the apps synch. Maybe it's a Mac vs. PC thing to consider data as part of the app/program.
Data backup and apps sync is a separate process, but they are all performed when you sync an iPad to a computer. I think the order goes something like:
1. App data and system settings are backed up. On a Win7 PC this goes into a folder called: C:\Users\YOUR_USER_NAME\AppData\Roaming\Apple Computer
Other versions of Windows might put it in a slightly different location, but you get the idea.
These backup files are compressed, and not really readable. That is, if you create a document on your iPad, it will be somewhere in these backups, but you wouldn't be able to see it or use it.
2. Any apps that are on your iPad but not already on your computer are copied to your computer. This goes into the Mobile Applications folder inside your iTunes Media folder. You can see the location of your iTunes Media folder by going into iTunes Preferences and clicking on the Advanced tab.
3. Music, video, podcasts, etc are synced. (If you have set up your iPad to sync music)
4. Calendar, contacts, bookmarks are synced, if you have them set up to sync.
5. Photos are synced, if you have set them up to sync.
These are all separate processes, but when you click the sync button in iTunes, they are all performed one after the other. Again, I'm not quite certain about the exact order -- 3 and 4 might be reversed, for instance. But I hope you get the gist of this.