Hello guys, to start sorry about making a new thread, I did search (probs not hard enough) and I'm really tired

please forgive me.
I have no extra HDD to back up any data I may lose but I have a 2GB memory stick!
Well all I need to know is. Is backing up and reformatting something that really could really be done every once in a while? (When people send me pictures now it can take along time before I can view them). And what does reformatting do? deletes EVERYTHING? Like my game save data(can I still download my killzone 2 maps without using like 4/5 downloads), my psn and PSOne Classics(Flower, Sodoku, Everybodies Golf, Kulu World), music (can easily put back on) ect well you catch the drift.
It's just I hear alot of people on here backup data and reformat and my mate sugested it tonight.
PS I've never formatted since buying my PS3 just before last christmas.
Don't kill me