How to backup and restore files in Windows 7 before installing Windows 8?
In addition to buying a hard drive and manually transferring all your important files, you could use a Time Machine-like feature for Windows -see this site for more info http://www.pcworld.com/article/146197/article.html.
Also consider using cloud storage such as Dropbox, Skydrive, Google Drive, or Box. Or all of them!
If you're just performing an upgrade, you can choose to keep your files.
However, for straight backups, I use the auto-backup key on my Western Digital HDD, one press to back up all my selected folders, and Synology Cloud Station keeps all of the rest of my files, programs and settings backed up automatically without me having to do anything, and instantly synced them back to my Windows 8 computer from my Synology after I installed the program again.
Be smart and safe, use a second dedicated hard drive to move the location of your user folders to in Windows 7 and do the same once Windows 8 is running everything will still be in the same place and ready to run instantly. You may get an extra HDD to backup the data one for added security.
insert your windows 8 disk it will ask you to upgrade
I would backup using an image program, this way you make sure that nothing is lost, you can later restore the image so that the computer returns the exact state before the operations. My favorite image backup program is Paragon Backup & Recovery (free) : http://www.paragon-software.com/home/br-free/
I would utilize an external hard drive and take a complete image of the hard drive in Windows 7. Expect to re-install some of the apps, but you will have the configuration.
On the second read of your post, if you want to fully backup Windows 7 along with all the files etc. Then the easiest way is to create an image of your C drive assuming thats where your Win7 is.
Download something like Macrium Reflex which is free and does an excellant job and back up the image to a second drive, preferrably an external.
You will need to create a restore disk but Macrium will guide you through that.
Sorry if I misunderstood the first time around.
If your intent is merely to create a backup of your FILES (as distinct from settings), you can simply copy the relevant folders from your profile folder (typically C:\users\username\) onto an external disc.
You should consider, though, copying the whole profile (i.e. the whole of C:\users\username, not just some folders from within it). This is because there are some hidden folders in it e.g. "Local Settings") which may contain important data, like your email messages, depending on the software you use. To do this, make sure before you copy to show the hidden files as follows: Open "Computer" and choose Organise=>Folder and Search options.
Click the "View" tab and tick "Show hidden files, folders and drives".
If you want to make this "backup" as part of the process of transferring your files & settings to Windows 8, use "Easy Windows Transfer" instead. You can find it under Accessories=>System Tools.
If you are going to perform an 'Upgrade' to Win8 then Windows will ask if you want to keep all your files.
Windows 7 Backup And Restore Utility
How to Transfer your files to a Windows 8 Computer