Websites crash, sometimes together with server hard drives
In most cases, your site is physically located on the hard drive of the server in the data center of your hosting provider. This hard drive is the same as in regular computers and although the modern hard drives are fairly reliable, almost everybody has come across the problem of losing data due to some failures.
Will the hosting provider perform the very expensive recovery operation of the hard drive if it crashes?
N.B. Backups made via the hosting provider's control panel are as a rule located on the same computer where your site is stored so if the hard drive breaks down, the site will disappear along with its backup copies. All this is true for both shared and VPS hosting as well as for other types of hosting, except for cloud hosting.
You can see for yourself how big the problem is by looking at how often people google the following key phrases*:
"site down" - 90 500 people try to find it every month
"website is down" - 110 000 searches per month
"database corrupted" - 8 600 searches per month
"restore database" - 49 500 searches per month
*According to Google AdWords Keyword Tool
Websites being hacked
The problem is so big that even Google Webmaster Tools have a special section called "Malware section" whose aim is to notify you in time that your site is infected.
To bring the site back to life after is has been hacked, you need to get the files and database of the site back on the server the same as they were there before it was infected.
And if you run a commercial site?
How much will it cost you to lose the data? Suppose you are responsible for the operation of your company's website as an employee or you have started some community on your site (forum, for instance). What do you risk by losing data in this case?
Backups from the hosting provider is not the best solution.
Hosting providers often offer a backup option for your site but, as it happens, this kind of backup is very often incomplete and outdated or it quickly occupies the space the hosting provider allocates for your site. Besides, this backup may be permanently lost together with your website if there are any problems with the hard drive it is stored on. If your website is suspended by your hosting provider (maybe because someone hacked your website and it has been distributing malware or you have simply violated the TOS by accident), the hosting provider will not let you have the backup copy.