Q: I want to upgrade from Yosemite to Sierra. What should I use to back up my iMac beforehand.

An external hard drive.

For software, you can use Time Machine, Carbon Copy Cloner or SuperDuper.

The advantage to the last two are is they are capable of making a bootable clone for you which will allow the fastest recovery of your Mac should anything go wrong.

An even better solution would be to use both Time Machine and one of the cloning apps so that you have two different backups made using different software.

Time Machine, a clone. or a Disk Utility/Restore copy. Please note that this will reformat the destination drive.

Clone  - Carbon Copy Cloner          (Often recommended as it has more features than some others)

Clone – Data Backup

Clone – Deja Vu

Clone  - SuperDuper

Clone - Synk

Clone Software – 6 Applications Tested

Time Machine Versus Clones and Archives

Commonly Used Backup Methods

Time Machine Basics

Time Machine Basics (2)

Time Machine Basics (video)

My preferred app is Carbon Copy Cloner. Just clone your existing system to an external hard drive. You can then upgrade either your system drive or the clone to test Sierra. I would probably upgrade the clone on the external and leave my main system drive alone until I could be sure that there are no issues and no apps that are not compatible. You should also save a copy of the Sierra installer app, which will be downloaded to your Applications folder. Option-drag it to a safe location outside of the Application folder. The installer deletes itself after it finishes, which means that if you need it in the future, you have to download it again, unless you saved a copy.