Back story is the bane of my existence. I worry constantly about where and how to sprinkle it in to my stories so that the reader stays solidly on the path between too much information and not enough. And the truth is, I think I'm right to be angsty. Go off the path too much in either direction and your story can die before it ever gets a chance to really live. The reader either gets bored with all the explanation and puts down the book, or she (I'm using she because my readers are mostly female, but please feel free to adapt this to the gender of your choice) never gets invested in your character at all because she doesn't know enough about them. So how does a writer ever really know how much back story to include? And does the amount change if your genre is say, science fiction as opposed to contemporary?
In my humble opinion almost all back story that needs to be written, needs to be written for the writer, not the reader. That doesn't mean that you don't need to include any. I think you just need to approach it with the attitude that any writing done on it is more about your discovery of your character and the overall story arc than it is about orienting the reader. A reader needs a well-placed paragraph or a nicely crafted flashback, not pages and pages of description dealing with past events. They need a small trail of breadcrumbs to follow, not the whole loaf of bread. BUT you as the writer need the crumbs, the loaf, the package it came in and a detailed record of how it got into your pantry. You need to know all of it so that when your character is faced with events happening in the actual story you are trying to tell, they behave appropriately based on their back story. This means you will be writing a lot of things down that are not ever and I mean EVER supposed to go into your finished manuscript. It isn't a waste because they won't, it is a necesssary means to an end.
This is hard to hear, I know. I understand because I too have slaved over pages and pages of back story and have held it in my hands, hefted its weight and not wanted to let it go. But go it must if any of us are to graduate from unpublished writer to published author. I happen to believe that Stephen King is right when he says that a story is an artifact-an already existing thing that the writer uncovers. This means that in the process of uncovering it, the writer has to dislodge and cart away a lot of dirt in order to get to it. Dirt she spent a lot of time digging and contemplating as she worked to get to the artifact beneath. Dirt she may very well be a little fond of now just because she's spent so much time elbow deep in it. But, leave the dirt, keep the story buried.
So how do you know what to put into the story and what to leave out?
The answer: You don't always know exactly for sure. But erring on the side of less is more is a good guide to start with. Do we need to know that your main character's dad has beat her for the past three years every time he drinks so that we get why she is afraid of him? Yes. Do we need a long and heartbreakingly detailed description of one or more times that it's happened in order to undertand her fear of him? No, not if that's not the focus of the story. I just gave you that info in one sentence. You could accomplish it in a story by having her try to get him to stop after one drink while they are in the midst of a scene that actually furthers the plot and him hurting her then or her alluding to it. What you don't want to do is take a break from your actual scene, to tell us all about it. It rips us out of a scene and puts us into another one and we get confused about what we're supposed to focus on. Check out how John Green deals with the history of his characters and how it drives them in the story in Paper Towns. Their history is a big part of what's happening in the story, but you'll still see that he sprinkled, not dumped it in.
So what if you're writing fantasy or science fiction?
Then you will have more world building and world history to construct, but the principle remains the same. We only need the bits that are relevant to what's happening in the story you are trying to tell, what will further your character's growth or the plot. There may be more elements of your back story that are relevant, but they still won't amount to major info dumps. Check out NK Jemison's The Hundred Thousand Kingdoms for an idea of how to take a very elaborate fantasy backstory and get the gist of it into a story successfully.
To me, this is one of those pivotal points for writer's to grasp. It's what helped me go from unagented to agented for sure. Once you embrace it, you'll be surprised at how much you're writing improves.