A wallet backup is a copy of your Dogecoin wallet (or your wallet's private keys) that you can use to recover your dogecoin if something bad happens to your original wallet file. "Something bad" can mean anything from someone stealing your computer, a hard disk failure or some other serious computer problem.
No, MultiDoge does this automatically in the background using special files that are described in detail in the File descriptions article. These files can often be used to recover your wallet automatically should a problem occur.
MultiDoge will place the backup files in a sub-directory created in the same directory as wherever you created the wallet.
The backups are encrypted the same as the original wallet.
Backups only work if you have access to them. If you rely on the default location for wallet backups then you are at risk if your computer is stolen or damaged beyond recovery.
A good backup is a copy of your wallet file that you store off your computer. That way if something happens to your computer you still have access to the backups. IT professionals have a saying: "Data doesn't exist unless it is in two separate places".
At the very least you should have the following in place:
You must use encrypted wallets if you are storing them off your computer.
You should export your private keys each time you add a new receiving address to your wallet. Then keep the export file in multiple safe places! Set a strong password on the backups and make sure you never forget it! There is no way to retrieve your keys when you forget the password. For instructions on how to export your keys, check this help page.
Please refer to the moving a wallet article.