I as well was having quite a difficult he find information on this. Since you're running XAMPP, like I do, that means that your base operating system is Windows.
You can see this by typing this into your browser window: http://localhost/xampp/phpinfo.php
According to the backup buddy help file, http://ithemes.com/codex/page/BackupBuddy:_Frequent_Support_Issues#Users_of_XAMPP_.28Windows.29, under the compatibility mode section it recommends
If you are running on a Windows server you will need to install the Windows zip.exe executable (we do not provide support for setting this up, though the readme.txt in the file does help).
So go download the file from this link:
http://pluginbuddy.com/wp-content/uploads/2010/05/backupbuddy_windows_unzip.zipAnd then put the zip.exe file in the web root directory of your WordPress install. This is the same directory where index.php and wp-config.php reside. Zip.exe is used by the main BackupBuddy plugin for creating full and DB only backups.
Hopefully now things should run much more smoothly and faster.