This will back up your user account, along with any other accounts on the Mac, plus any shared data. When choosing what to backup manually, most importantly look at the Users folder, located by default at Macintosh HD/Users/.
So, If you skip this step, you won’t be able to recover your data if something goes wrong. Note: A clean install of macOS Sierra on the startup drive completely erases all data on that drive including all your files (documents, music, movies, pictures, and even apps).