1) In a first stage you simply select what items (= directories or files!) have to be backupped and what destination root you will use. This, along with some options, is combined into one PROJECT-file (.smd-file).
2) In the second stage (=backup), you choose to run the project-file and following happens:
A) precalculation: if chosen for precalculation then first the future free size is checked. If no space left, the process can be interrupted by the user.
B) cleaning (no effect if first run of project): it checks every file on the backup disk and all files on the destination which were eventually cleaned on the source are now also deleted in the destination.
C) updating (or copying if first run of project): all completely new and changed files from the source are copied to the destination using the same directory structure as in the source.
In this way, during the first run of a project to a disk you will create a quasi identical copy of the source and during other runs to that same disk you update that identical copy!

If you have a lot of files you can also make several projects. As all the project-files are saved you can quickly select them later on again to update the backup, leaving away the first stage.
It is also possible to edit projects later on (eg you want to add a directory).

Normal backup example
Suppose you chose as source item: c:\my documents
and as destination drive: d:
then the destination item will be: d:\SMDcopy_drive_d\my documents

Synchronized backup
From SmartDirCopy 3.0 onwards you can also opt to have a specific destination folder, without using the default SMDcopy_drive folder.
Example: suppose you chose as source item: c:\my documents
then you can synchronize this with d:\my documents for instance.
Working this way you can only add one source item per project file but it remains a great option for people for instance travelling a lot. You can backup from desktop to laptop, work further on your laptop during travel, and when back home you do another synchronized backup from laptop to desktop.

Remark
During both normal and synchronized backup, files will be copied from source to destination as soon as they are different (different size or different time stamp), so that a destination item will become identical to a source item.