What to do before reformatting phone or setting back to factory state?

Recently it seems as if my phone has bogged down to a point where is is almost unusable (Droid Eris running 2.1). I'm on the verge of reformatting or setting back to a factory state. I was wondering what things should I do to make sure I have all my contacts/pics/etc.. and what tools can help me accomplish this? Also what about the apps I have paid for? How can I get those to transfer?