Best thing is to do a nandroid backup. Power up the phone with the home key held down, wait for the boot menu to appear, and select nandroid backup. Once this has completed there will be a nandroid directory in the root of your SD card. This contains the complete backup of your phone: OS, contacts, apps, etc etc.
Note that installing modaco 3.2 doesnt wipe your phone or any of your settings (assuming you're currently at version 2.73 of the official ROM), so you dont actually need to back up your apps etc, they will all still be there after installation. However, well worth doing the nandroid backup anyway in case you need to revert to the phone's original state. Of course, once youve got modaco running then you will also have titanium backup which you can use to backup & restore apps piecemeal.
I always perform a nandroid backup before i do anything major to my phone, i.e. change ROM, upgrade radio, or when i finally got around to enabling apps2sd. Never had to restore from one yet, but better safe than sorry.