I save all raw files and working PSD files. I also archive are client formatted files (8-bit tiffs, jpegs and web-sized jpegs).
I maintain all the files in two locations, one on site and one off. I also am planning on installing a server, and all of my files would be kept on that as well if I did. (This would make three locations.)
I should not that I do not shoot many files on a typical job, roughly 6 to 8 images per day. After erasing the test captures, my raws do not take up a lot of space.