Technically, leenia, the .reg is just data, but since it's "registered" to run in regedit.exe, double-clicking on it opens regedit and the default "run" is to copy everything in the .reg data file into your registry. It isn't an "executable" in the strict sense, but it runs automatically if you double click.
One of the hazards with this is that "running" the .reg file in its normal exported form can add things to the registry, but won't delete anything already there. A "key" that exists in the registry and in the .reg backup will be reset to the "key value" from the .reg file, but a key that isn't in the .reg backup won't be removed.
A key that's been removed in the registry, perhaps by a new program installation or old program removal, will be replaced from a .reg backup, even if it no longer "does anyting." If you do this more than a very few times, you can end up with a few "redundant" entries in the registry.
I've avoided using Microsoft's (or anyone else's) "Backup Utilities" because of difficulties with older versions that I don't see as "corrected" in the new ones, so I suppose I really should try out the "Machine State Backup" described at the links to see for sure what it does. It won't happen soon, though. It may actually be the safest method for you, and I can't really say how much is contained in the backup if you follow the instructions. Any Registry backup from WinXP can be expected to be at least 40 - 50 MB though, so CD or a hard drive seem the only good options. A 100 MB Zip disk (or 250 MB Zip) might hold it, but I've found those even worse than the old floppies for safely storing info.