Calibre is the best choice for managing your e-books. I keep the "library" on the computer (which is backed up). Only the books I'm actively reading are on the reader.
I prefer ePub over Mobi, for the simple reason I can buy ePub's from a number of vendors, while Mobi is really Amazon only.
I also prefer vendors that do NOT encrypt (eg DRM), Baen Publishing is one that only encrypts if the author requires it.
One of the "down-sides" of managing your e-books only on your reader is that Amazon/B&N/Apple/what-ever can (and -has-) deleted purchased books from people's readers. This is usually a mistake, but...
I have issues with the entire idea of DRM and locking your purchase to a device. What happens of the company goes under (B&N?), how do you move your encrypted book to a new reader? It's really almost more like "renting" the book vrs buying a hard-copy book you can keep.