Google Alerts covers web sites, blogs, videos, groups, etc, whereas BackType Alerts focuses exclusively on comment-like data (blog comments, mahalo answers, yelp reviews, etc). A full list of platforms that BackType supports is available here:
http://blog.backtype.com/2009/01/now-supporting-posterous/

While Google Alerts are much more comprehensive, they very rarely alert you of your search term mentioned in comments. I would argue that the two should be used together; in fact, that's what we do to monitor "BackType". Both services allow you to receive alerts via e-mail (immediately or in digests) and feed.

Lately, I've noticed that Google Alerts have become a lot less accurate (stemming from changes they made to Google Blog Search). We've been receiving many erroneous alerts. Perhaps that's something a paid service like GoogleAlert.com can help with, though I wouldn't be surprised if it was just a scheme to get people to pay for similar alerts.

Hope that helps.

Disclosure: I'm one of the founders of BackType
Source(s):
http://www.google.com/alerts
http://www.backtype.com/
http://blog.backtype.com/2009/01/now-supporting-posterous/

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