Backstab is a covert command which allows you to sneak up on a target and hit them where it hurts doing larger then normal amounts of damage. You can backstab with any weapon (even unarmed). Weather or not you succede the backstab itself is dependant on your covert.stealth.wherever_you_are bonus (to see if they spot you or not), the amount of attacks you do is determined by your covert.items.weapon bonus and the amount of damage is dependent on your fighting. Also, different weapons are more suited to backstabbing. The best backstab weapons are Thieves' Daggers.
Backstab does less damage then ambush, however it temporarily lowers some of the target's stats. Also, you can walk in and backstab something in a room, to ambush something you must set an ambush and wait for it to walk in. If you backstab something and kill it, the next backstab you attempt in that room will be far more difficult to succede. My experiments seem to suggest that if you hide before each backstab, you have a much higher chance of succeding, especially the second backstab in a room.
Also, this command TMs well, you can TM co.st, co.po and co.it.we with it.
This command is one of the best thieves have at their disposal.