When any other kind won’t work.

Your backup will work.
This message (or variations on it) can be benign or can indicate a problem with the disk itself. Exactly how it’s reported depends on the backup software you’re using, but the concept is fairly consistent.
To understand the error, we need to understand a little about how your files are placed on disk and how that disk is typically backed up.
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Sector-by-sector
A sector-by-sector backup copies every part of a disk regardless of what is stored there. This happens if the software doesn’t recognize the disk’s format or finds errors. It’s usually fine, but if it’s unexpected, let the backup complete and then check the drive for problems.
Files on disk
At the lowest level, disks are organized as a collection of empty boxes, or sectors, into which the operating system can write data.

In the over-simplified example above, we have a tiny disk containing 15 sectors, each 512 bytes in size1. That means our disk holds 7,680 bytes.
Files written to a disk are allocated one sector at a time. This means a file that is 1025 bytes in size — 512+512+1 bytes — will occupy three sectors.

If you recall the concept of fragmentation, you’ll understand that the file doesn’t have to be organized in sequence, as shown above. Parts of the file can live anywhere on the disk.

Not only has our example file been scattered into three disjoint sectors, we’ve added a second file 1600 bytes in size (512+512+512+64, thus requiring four sectors), similarly distributed randomly.
Keeping track of where all those parts are is the job of the file system format. In Windows, that’s most commonly NTFS, but can other formats include exFAT, FAT32, or ext4 (used in Linux systems).
A traditional backup
A normal backup understands file systems and backs up files one file at a time. This is true for simple file-copy style backups as well as for system-image backups.
A system image of the second example above might look something like this:

The backup doesn’t reflect how the files were laid out on the hard disk. There’s no “wasted” space; each file takes only the room it needs within the image.
This requires that the backup tool understands how the files are laid out. In other words, it has to understand NTFS, exFAT, FAT32, and so on.2
A sector-by-sector backup
When backing up sector-by-sector, the backup tool ignores what the disk contains or how things are organized. As the term implies, a sector-by-sector backup backs up each sector on the hard disk in turn.
A sector-by-sector backup of our example disk above might look something like this.

I’ve colored the sectors containing files, but it’s important to realize that the backup software doesn’t know or care what is in those sectors. The sectors containing data, as well as the unused (white) sectors, are all written to the backup without any regard for what the layout means.
With that understanding under our belt, we can finally answer the question.
Why is my backup program talking about sector-by-sector backups?
Backup programs elect to perform a sector-by-sector backup in several situations. Here are the two most common.
Unknown disk format. Recall that I said the backup program needs to understand the underlying disk format organization like NTFS. If the disk doesn’t use a format that the backup program recognizes, then sector-by-sector is the only option. A Windows backup program trying to back up a disk formatted with Linux’s ext4 could cause this error, since Windows doesn’t understand ext4. This can also be the case if the disk isn’t formatted at all.
Errors. In the original question, the backup program reported an error on the disk being backed up. Usually, though not always, this is the equivalent of CHKDSK reporting an error. Because there’s an error, the backup program cannot trust that the disk formatting information is correct. As a result, the only safe thing to do is to backup the disk sector-by-sector.
Why you might choose a sector-by-sector backup
A sector-by-sector backup is sometimes referred to as a “forensic” backup. This is because in addition to backing up the data on your hard disk, it backs up:
- The specific physical layout of the data
- The file system overhead and tracking information
- The data that remains in unused or “free” sectors
This type of a backup can then be used to undelete files or perform other types of data recovery without affecting the original disk from which the backup was created.
What to do with unexpected sector-by-sector backups
So, you’re setting up a backup, and your backup program informs you that one of your disks will have to be a sector-by-sector backup. What should you do?
Let the backup proceed. What happens after the backup is complete depends on a few things.
Sometimes it makes sense for a backup program to choose a sector-by-sector approach. In fact, it’s so normal that some programs might not even mention it (other than in a log). For example, consider the following disk layout.

The “C:” partition is NTFS, and backup programs will recognize it. But the “Healthy (Recovery Partition)” has no format indicated. It’s common that a backup program may revert to sector-by-sector when backing up this partition.
Sometimes it’s the result of an error of some sort, as in the original question. Particularly if the error is in a data partition (like the C: drive above), then further investigation into the state of that drive is called for. That most commonly begins with a CHKDSK for diagnosis.
Do this
I can’t give you a blanket recommendation on what to do when you see a backup program indicate that it’s going to perform a sector-by-sector backup when you didn’t expect one, other than to say pay attention to the drive on which it’s happening. It can be an error, or it can be benign. Use the specifics of the drive and the details in any error messages to guide your actions.
But at least now you know what they’re talking about.
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