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Image Level backup is better, which also includes file system. But if the requirement is to have a daily backup for a perticular folder or file then its better to have a file level backup.
Image leve Backup is best, which includes files also.
On the outset I'm assuming that by file level it is meant agent based backup.
It really depends on what application and/or the host you are trying to backup and also the platform on which the infrastructure is running. For e.g.
1) Primarily vmware environment with mostly test/dev or finance or HR users is a good fit for image level backup
2) Primarily vmware environment but with lot of databases , also the with a lot of OLTP applications would be a better fit for a regular agent based backup
3) With physical servers you really don't have an option. Agent based backup is the only option you have. Although there are some tools which convert physical to virtual but that is still a work around
Point I'm trying to drive home is that this is not a straight forward comparison. There are a lot of factors that go into deciding which approach is suited for an environment. Infact we can have different combinations inside the same environment.
