Confused about Read Write vs. Sparse Images
 

I am backing up to a Network and would like to know if this file can be used to recover the entire system?

If my entire system crashes and I need to bring it back up to a fully working state, can I do so with a Sparse Image?

I'm a little confused between the two types of backup and do not understand the difference. Any help would be appreciated. Thanks.

A sparse image, yes, as explained in "Recovering from a disaster" in the User's Guide. A network restore is more problematic, since you need network access. Typically, you'd need to either use another Mac, copy the image locally and go from there, or go from a bootable partition/device before you restore.