In. We are taught to never back up.
Your mileage may vary.
Increasing distance, or zoning out as the Jeet Kun Do folks would call it, is different from backing up. Backing up is a retreat, it involves a collapse of the forward intention, often a shift of weight back.
Stepping back can be done while maintaining a forward intention both mentally and physically. If when I step back my mind stays focused inside the partner's attack and my weight stays forward, the movement functions to draw the attacker in. But when he is drawn in, you actually have irimi and are inside his defense.
There is nothing wrong with stepping back... you should be free to move in any direction you wish without losing connection to the partner. Backing up, on the other hand, happens when you are forced out of your space by your opponent. Once you back up, the attacker will fill the space you have vacated and still keep coming. You can tell when you have backed up because you have no irimi and you can't stop once you start because the attacker never lets you recover.
But it isn't the problem with stepping back; it's the fact that your mind caved and lost its forward projection and your body lost it's ability to move forward. The difference between zoning out and backing up is largely mental.