Hyper-V Granular Backup vs. Hyper-V Full VHD Backup

The idea behind Hyper-V granular backups is to back up certain folders more often than the entire VM, for efficiency reasons.
For example, you could back up a SQL database folder every hour via granular backup, and the entire VM each night as a full backup.
Both types of backup together in one task would make sense if you needed to have separate backup history lengths for the whole VM vs. specific files inside the VM.

Granular backup eliminates the need to install backup software inside the VM and it’s also more efficient than using the VM’s virtualized hardware to do backups.
Also from a management perspective it’s better to use granular backups. With the exception being pass-through disks and some Linux variants, you will probably be fine with granular backups running on the host.
If you need a full VHD backup, it’s more efficient to use the Hyper-V tab and let BackupChain make a full backup of the VHDs instead.
The most likely scenario for Hyper-V Granular Backup is to have certain files from inside the VM backed up separately (likely on a different schedule using a separate task).
Granular backup is commonly deployed to back up databases inside VMs, such as Microsoft Exchange, SQL Server, etc.
In terms of space and time usage, granular backup may be more efficient, too, in some scenarios. If your VM is huge but you only want a small folder backed up often, it’s more efficient to use granular backup.

Most admins probably would want to use both, granular and full VHD Hyper-V backups in a customized, hybrid Hyper-V backup strategy.

See it in action: How to Configure a Hyper-V Granular Backup. Note Granular Backup also works for VMware, VirtualBox, Virtual PC, Microsoft Virtual Server, and VMware Server VMs.