Backout is basically four steps rolled into one:
hg update -C -r <rev-to-backout>
hg revert --all -r <parent of rev-to-backout>
hg commit
hg update -C -r <startrev>
There's a fifth step that is done automatically if you specify --merge :
hg merge (merges <startrev> with the newly committed rev from 3.)
Mercurial keeps system wide configuration options in the file /etc/mercurial/hgrc and user configuration options in ~/.hgrc (in your home directory). We will write some user configuration options to ~/.hgrc to tweak how Mercurial works.