Android - How do I know when "adb backup" is finished?

The adb backup command won't work fully on an unrooted device as it will attempt to backup things like the /system partition, and without root access the phone will deny you this for safety reasons. I'm glad to hear running it with the -nosystem flag worked out for you :)

If you want to do a complete backup you need to be rooted. The /system partition, according to this page:

contains the entire operating system, other than the kernel and the ramdisk. This includes the Android user interface as well as all the system applications that come pre-installed on the device. Wiping this partition will remove Android from the device without rendering it unbootable, and you will still be able to put the phone into recovery or bootloader mode to install a new ROM.

This means that your backup does not include anything related to your operating system, only your apps and their settings. If you decide to root your device, you can create a very solid backup from CWM Recovery where all partitions are backed up to the sdcard on the device, including the system and boot partitions.