What they all said, plus.....
You would do a nandroid PRIOR to doing anything major with your operating system, such as flashing a new ROM, theme, radios, etc. You don't have to, but when one of them fails and ends up locking up your phone, you'll have to go to your latest backup which could set you way back. My method is kind of like this:
Back up all apps and data using TiBu.
Run a nandroid backup using ROM manager (don't have to use ROM manager, just easier)
Flash ROM/Theme/Radio
Restore all market apps and data using TiBu
I also recommend using an alternate launcher (over stock) if you flash ROMs fairly often. The reason is the launcher is then an app and it's data gets backed up with TiBu. So when you restore apps your screen comes right back to where it was (it can take forever to re-setup homescreens otherwise). I use Go Launcher EX but there are many out there (and some ROMs come with them, but don't know if they restore like Go Launcher does).