Different from Time Machine in the sense that you would restore everything from the last point you backed up, not just restore a single file like you can do with Time Machine.
You create a back up in iTunes. Connect your iPhone, wait for main display to show up in iTunes and there are a series of (I think) 3 tasks in the center of the display. One is check for latest iOS update and something else and then "Back Up to this computer". --I'm not on my Mac right now, so all of this is from memory and not exact wording-- You can view your back ups by opening iTunes Preferences (different than settings for your iPhone). It will bring up a window, go to the "Devices" tab and that will show the backups you have created for your iOS devices. It backs up apps, music, ring tones, and all settings on your phone. Including background photo on home screen and lock screen, contacts, etc. Everything If your phone falls in the pool and you have to replace it, you can restore using your latest backup in iTunes and then it's like you have your same phone again. Get it?
Like I said, I'm going from memory so maybe this is not 100% accurate so feel free to correct me, guys. But I'm pretty sure it's right.