Back up will save/cache a copy of some data from your device that are Apple-based as well as some 3rd party data such as game saves, etc. Restore as in the button next to "Check for Updates" will wipe your device and install a clean copy of your iOS. Restore from Backup will re-apply the saved/cached data on your computer through iTunes back onto your device. This is just to clarify the 2 different Restores that are present in iTunes since it's not specified.
Restoring from backup generally takes longer to perform than backing up because iTunes has to verify the data on the backup to ensure that the data is not fragmented and were not manipulated. Any manipulated data will either return an error, or will be ignored during the data restoring process.
When your phone gets lost or stolen, you would use iCloud to track your phone, or call your mobile carrier provider to blacklist the IMEI of the device. If you find the device again, you can unblock the IMEI through your mobile carrier provider, if not, then the device cannot be activated again. If a person attempts to restore your device, even in a DFU restore, they will be asked to enter your iCloud credentials in order to activate the device. This doesn't have anything to do with backing up or restoring from backup.
New backups of the same device will replace the previous backup unless the backup was made on a different iOS version. This is contradicting from discussion to discussion. Some users have access to all historic backups even on the same iOS, some only have 1 backup (if on the same iOS throughout), and some have multiple backups from multiple iOS. Depending on the utilities that you use, you can have a history of all backups on any and all iOS, and you can access them at any time. Though conventionally speaking, you will only have 1 restore-able backup unless you've upgraded your iOS and made a backup on that new iOS.
Androids are more flexible in that you can make a copy or store the data on a microSD and take it out, saving it for a rainy day, or, you can just open up the removable disk/peripheral icon in Computer or My Computer and just drag-and-drop the data onto your computer. For devices that are not rooted, devices with no microSD slots, or both, you'll need a third party utility to backup the device, but mainly, your device must be rooted for Android in order to use backup utilities. You can also openly backup selected files to the cloud to Box, DropBox, etc if you don't have access to a microSD slot or card. For iOS devices, you can backup certain data, but not selectively and openly like Android.