Replying to Resetting MacBook factory settings.

Okay, so I have a MacBook that I bought 2 years ago and it has a 160GB HD and it's super full and I have 10GB left and anytime I go to edit anything in any program it's super slow and glitchy. So I hope that by setting everything back to factory settings I can eliminate this problem until I am finished editing. I have backed up my files onto an external HD. Does this only back up your files or does it back up your applications as well? Say I deleted everything off my computer right now, would it be the same as it is right now if I restored it with my external HD? I just don't want to delete everything and then lose it all when I want to get it back.

So if any of you could help me with this it would be appreciated!

Spark Notes: Say I deleted everything off my computer right now, would it be the same as it is right now if I restored it with my external HD?