[Q] What does a nandroid backup contain?

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http://forum.xda-developers.com – When I perform a backup from recovery (or via a front-end such as ROM Manager), what exactly is saved? Is it like a clone of a hard drive in the PC world? Does it contain only data, and not the actual ROM? How should I go about using such a backup when doing a restore? Should a ROM be installed first, followed by the restore? If so, must the ROM match the backup exactly -- that is, must it be the ROM under which the backup was performed in the first place? (HowTos)