I would avoid a time capsule because of heat. The AE gets toasty by itself, and i've felt a live time capsule; the heat is just ridiculous, and can kill a hard drive quickly. My personal solution is an Snow Leopard Server with several TB of storage. Some drives contain master data, where one is an 'internal' daily dedicated backup that all the drives, including network clients, back up to.

1. Best Option For Backing Up Photos
2. Best Way To Backup Macbook Air

Best Option For Backing Up Photos

I also back up to a 2TB G-Drive Q via eSATA which houses everything I cannot easily replace and is taken off site weekly. I run a paperless workflow, so I literally have every peice of paper i've ever owned digitized and encrypted via Acrobat 9 without the physical stuff, so data integrity and availability is very important to me. This level of sophistication is unnecessary if you require only file storage.

All you need is an external drive with robust cooling. A desktop external would be cheapest, though a mobile drive is smaller and more portable (obviously). Stay away from plastic enclosures that do nothing wrt heat. Get something robust. Best free mac apps for graphic designers. Active cooling (with a Fan) is ideal but not very common on mobile drives, so get something with aluminium.

Best Way To Backup Macbook Air

The OWC Elite-AL minis look like good candidates. WD's new Mybook Studio LX is very pricy, but offers an all aluminum enclosure, encryption (which you may/may not be able to take advantage of) and an LCD display. Or build your own NAS. Lets you configure RAIDs or really whatever you want. They've got great cases like that will allow you to even hot-swap disks. Much cheaper then an mini and much more flexible.