An alternative backup strategy is to directly copy the files that PostgreSQL uses to store the data in the database. In Section 16.2 it is explained where these files are located, but you have probably found them already if you are interested in this method. You can use whatever method you prefer for doing usual file system backups, for example
tar -cf backup.tar /usr/local/pgsql/data
There are two restrictions, however, which make this method impractical, or at least inferior to the pg_dump method:
The database server must be shut down in order to get a usable backup. Half-way measures such as disallowing all connections will not work (mainly because tar and similar tools do not take an atomic snapshot of the state of the file system at a point in time). Information about stopping the server can be found in Section 16.5. Needless to say that you also need to shut down the server before restoring the data.
If you have dug into the details of the file system layout of the database, you may be tempted to try to back up or restore only certain individual tables or databases from their respective files or directories. This will not work because the information contained in these files contains only half the truth. The other half is in the commit log files pg_clog/*, which contain the commit status of all transactions. A table file is only usable with this information. Of course it is also impossible to restore only a table and the associated pg_clog data because that would render all other tables in the database cluster useless. So file system backups only work for complete restoration of an entire database cluster.
An alternative file-system backup approach is to make a "consistent snapshot" of the data directory, if the file system supports that functionality (and you are willing to trust that it is implemented correctly). The typical procedure is to make a "frozen snapshot" of the volume containing the database, then copy the whole data directory (not just parts, see above) from the snapshot to a backup device, then release the frozen snapshot. This will work even while the database server is running. However, a backup created in this way saves the database files in a state where the database server was not properly shut down; therefore, when you start the database server on the backed-up data, it will think the server had crashed and replay the WAL log. This is not a problem, just be aware of it (and be sure to include the WAL files in your backup).
If your database is spread across multiple file systems, there may not be any way to obtain exactly-simultaneous frozen snapshots of all the volumes. For example, if your data files and WAL log are on different disks, or if tablespaces are on different file systems, it might not be possible to use snapshot backup because the snapshots must be simultaneous. Read your file system documentation very carefully before trusting to the consistent-snapshot technique in such situations. The safest approach is to shut down the database server for long enough to establish all the frozen snapshots.
Another option is to use rsync to perform a file system backup. This is done by first running rsync while the database server is running, then shutting down the database server just long enough to do a second rsync. The second rsync will be much quicker than the first, because it has relatively little data to transfer, and the end result will be consistent because the server was down. This method allows a file system backup to be performed with minimal downtime.
Note that a file system backup will not necessarily be smaller than an SQL dump. On the contrary, it will most likely be larger. (pg_dump does not need to dump the contents of indexes for example, just the commands to recreate them.)