What 'adb backup' stores? And what are its rules?

Question

I just found a suggestion for backing up a device. Running this:

adb backup -apk -shared -all -f C:\Users\NAME\backup.ab

I am not an Android developer so I'm not familiar with all these commands (-apk -shared etc).

1. What data this backup stores/has in it? Is there any Google article related to this?
2. Can I use this backup and restore it to other Android version(API level)? Backup 4.1.2 and restore the backup on 4.3?
3. Can I use this backup and restore it to other Android Device? Backup Galaxy 2, and restore on Galaxy 4?