Your friend is sort of correct. You only can backup your whole system if you are not in windows. In other works you have to be in the command PC bois (the thing that loads your operating system up with the black background and white text).
I usually backup my whole system onto CD-Rs or on another partition from my hard disk. I use Norton Ghost 2003 for this. You can use this program to backup your system onto another drive (USB 1.o or 2.0/firewire) Just change the advance settings to the desired option(s). Try a google search for a Trial version or download the full version from the Symantec website for around £40.