Read the official Contao announcements.
Live Update with database backup
by Leo Feyer – Announcements
Version 3.0 of the Contao Live Update now creates backups of the database and restores them automatically when you upgrade or downgrade your installation.
The tool uses the PHP functions shell_exec() or exec() to access the command line and invoke the commands mysqldump and mysql. If those functions are not available or the MySQL commands cannot be found using which, the Live Update will process without a database backup.
The new steps are number 2 and number 5, in which firstly the current database is backed up and secondly the backup matching the target version (if one exists in the system/backups folder) is restored.
Like with every other PHP MySQL backup solution, the execution time and the memory consumption of the PHP process can be limiting factors depending on the size of the database. You might need to adjust the PHP configuration in such a case.