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It will create a new full image every time you run the software. The image is a single file that's explorable and selectively or completely restorable. If you want to do incremental backups, you can buy the retail version of Acronis True Image, and schedule your backups to run automatically.
The reason I recommend a separate housing and drive is for warranty issues - if you buy a prebuilt external you cannot open the housing to remove the drive without voiding the warranty. Generally, hard drives are more reliable than the housing, and if the housing dies, you can pull the drive and recover your data. Also, that housing is higher quality than any prebuilt I've seen. It's aluminum, not plastic, and has an internal cooling fan.
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