Why is SQL Server backup so much larger than the DB files?
It might be because the backup routine is appending the new backup to the same file?
There is an option in the Backup dialog in Sql Management Studio to Append or Overwrite all existing backup sets. If you have Append if will add the backup to the same .bak file and the .bak file will be larger for every backup.
In Transact Sql it is the INIT and NOINIT option which determine if the bak file is overwritten or appended.
In my case, I found that the 500MB database also had a 560MB full text catalogue attached which gets included in the backup file. I thought I'd add this despite another answer having been accepted in case anyone else is still stumped :)