pcpunk, yes you have those two choices.
For maximum protection, you should always backup all local drives on the computer, if there's multiple hard drives or SSD's, do it one at a time. Simply check the drive you wish to image. By default, all partitions are pre-checked. This will image & restore the entire drive in the event of failure or infection, using the bootable media you created.
The other option, "Create and Image of the partitions in order to back up and restore Windows", is what it implies. That will only backup the Windows partition, including any system partitions on Windows 7 & 8/8/1 needed to boot & run Windows.
If the Windows install the only partition on the drive, then you can use that option.
When Macrium creates the image, it'll also verify it to ensure that the integrity of the files are good, in other words, your image should be restorable. Not once have I had a Macrium backup fail to restore on my computer. There was one time with someone else's, that it failed, what the deal was, the person left the portable drive plugged in against my advise, there was a small Data partition on it (not wise to do). Anyway, the backup drive had been defragmented several times & it was the owner's fault that the corruption took place. Not the fault of the software or the image I created.
Backup drives should be used only for backups & nothing else. Period. Should it become infected, everything on the drive can be.
You'll know if you did it right, there will be a progress bar & you can see it in real time. There is even an option at the bottom of the backup window, a tab that says "Upon Completion". By default the computer will stay on, but you can click on it & choose Shutdown. This will take place only after the backup finishes & verifies.
Hope that this helps to explain. The more you use the app, the more comfortable you'll be in running it. I was confused the first time myself. BTW, Macrium is considered by many the best free backup app one can have. One can buy a brand new computer that ships with a 1TB HDD & clone it to a much smaller SSD, like I did late last year. It can do a lot.
Should you have any more questions, just ask.