What folders should I be backing up? Are there any I should avoid? I'm in the process of configuring a cloud backup for my OS X machine and am trying decide what folders to back up and whether there are any folders I should avoid. 

I have complete control, by folder, over the frequency of backups, and can "seed" the backup locally (so the size of the initial backup is not an issue). My question is about (1) whether there are certain folders I want to be sure not to miss (e.g. they contain settings or history that it would be a bother to recreate) and (2) whether there are other folders that are best avoided (e.g. it is either more convenient or safer to "restore" their contents from other sources, such as a reinstall). And, as with all backups, a dimension of interest is the degree to which backing up a given file or or folder will cause frequent large backups of things that don't matter much. 



Note that this is not intended as a "bootable image" backup, but rather as complete a backup as necessary for any restore other than a bootable image. Note also that I have access to all files on the machine, including hidden ones.
Some people recommend backing up your entire ~/Library folder. But I find there are a lot of things in there I wouldn't want replaced if doing a clean install. So I selectively back up certain contents of that folder, along with certain contents of the system level /Library folder.

You should poke around in ~/Library and see what's in there that you need. Here's a list of what I backup to get you started:

~/Library/Application Support and ~/Library/Preferences are where most of your application settings live. You should go through each of those folders' subfolders and see which ones you need.

Notably, Address Book's database is stored in an Application Support subfolder while some other Mac OS preinstalled apps have their folders directly at the ~/Library level. It's a good idea to look through the folders at that level as well. For example:

~/Library/Mail has your Mail.app data.

~/Library/Calendars has your iCal data.

~/Library/iTunes has all your iOS device backups and iTunes specific scripts.

~/Library/Scripts is probably where you install scripts if you use AppleScripts as folder actions.

~/Library/ScriptingAdditions holds any AppleScript additions you've installed.

~/Library/Keychains is the default location using Keychain Access to save passwords.

~/Library/Fonts for all fonts installed for the current user.

~/Library/ColorSync for all color profiles installed for the current user.

~/Library/Safari/Bookmarks.plist has your Safari bookmarks. The other stuff in this folder is a good example of what I'd like to NOT be restored after a clean install.

The structure of the system level /Library folder closely matches that of the ~/Library folder, so if there are things in there (fonts, color profiles, scripts etc.) installed "for all users", you should back those up too.

Hope that helps you get started!