How to backup iPhone by iTunes?
By the wording in your question - it appears that two things are in order:


Short answer on what a backup is
Short answer on how to start one


Answering the how to backup is easiest. From the view menu, be sure you choose "Show Sidebar" so that you have a place in the main iTunes window to see the device when it gets connected over USB. Make sure the main window of iTunes is visible and connect your phone. If you have a Mac, the phone usually shows up under Devices within half a second or two. On a PC, you may need to wait for antivirus scanners, or the OS to recognize the device and perform a step or two in the OS to allow the computer to talk to the phone. It too should eventually show up in the sidebar. Either way, once it appears, use the mouse to click once on it. It should show the summary tab, but if not, click that at the top of the window just below and to the right of the play/pause button.

Now iTunes will show you one of many screens to manage the device where it normally shows the store or your music library. 



Here you can see on the left where the device might be configured to back up to iCloud. You can change that or leave it as it appears. On the right, you can click Back Up Now and get a local backup.

Now to answer the "what is backed up" - you can read over this article while your backup is running. HT4946: iTunes: About iOS backups In particular, music is not backed up since it either came from a computer or from the cloud, so iTunes and iOS assume you back up your computer and they back up the cloud so you don't need to waste space on your computer and time backing up something that was just synced to the iOS device as opposed to being created there or only being stored there.

Once your backup is complete - click on the info tab and perhaps consider syncing the contents from addresses and calendars which will make a copy of that data available on your computer as opposed to having it stored away in a backup file where you can't really get to the contacts other than restoring them again onto a phone (replacing the contacts that were on that device in the process).