Drag and drop suffices if all your software is either downloaded as disk images for installation, and you have the registration codes written down someplace safe. But remember, the backup must be done to at least a secondary separate external device (flash drive, optical disc, hard drive, or network drive), and preferably to two separate distinct devices, as one may have failed already at the time you are trying to recover original, when the original has failed. The likelihood of all three failing simultaneously is slim, unless all of them are stolen or lost to a disaster. Drag and drop will not preserve the ability of the operating system to boot, but can if you are careful to drag and drop plist files preserve registration codes. You still need to know which files are needed for specific applications to ensure you get the right ones. Checking with the vendor in question should help.
If you have CDs for installation or you don't have all your registration codes, making a disk image that can be restored is one option for backing up. I for one prefer cloning software such as Carbon Copy Cloner or Superduper as it is faster and easier to verify than the disk image method that your backup was valid. And what a clone is, is an attached hard drive at least the size of the original with an exact replica of the original. Good cloning software such as either will let you keep the clones up to date with the most current files in the condition at time of cloning. Again, as with drag and drop, you need two distinct hard drive hard drives that are external to be your backup to ensure you are in relatively safe standing, and don't leave them connected once the backup is complete. And backup as frequently as necessary to ensure you don't have too much rework to do to redownload new software, install it, etc...A good clone is bootable. To learn more about what is bootable and not on a Mac, see this tip. The other advantage of clones, is they are more easily imported with the Setup and Migration Assistant as long as the platform hasn't changed too much. When people migrate from 2005 and earlier machines, they can't use the Assistant, and instead must follow these steps.
Disk Image clones while they work don't offer the ease of just updating the clone with what has changed since the last clone made.
Cloning is not archival though. If you make a change to a file, and delete it later, your next clone will delete it from the backup. So decide where you want to keep your archives separate from your clones if you can't lose precious space for it.
Time Machine offers a nice compromise, but it is dependent on the space available on the destination. It will recursively decide which files to keep from the last hourly backup, last daily, weekly, and monthly, and which to toss depending on how much space it has. You can setup Time Machine to only backup manually, and show you when it is backing up, and once it is done, burn the specific archive elsewhere, so you don't lose it if you have to remove it from the original at a later time.