Factory backspacing is 5.25". Smaller backspacing will move the wheel out. For example: 4.5" backspacing will move the wheels .75" out from the factory wheel location. Many lift kits reccomend 3.5" for a Wrangler. I ran 32's on the stock YJ 7" wheels, adjusted the steering stops slightly, and had no rubbing at full articulation! I just ordered wheels for my XJ with 5" backspacing, and I will likely have to adjust the stops again.
Alot of the choice boils down to preference. I am willing to sacrifice a little from my turning radius to keep the tires under the factory flares, while some prefer the "sticking out" look.
Moving them out too far will cause the tires to hit the flares when flexing if they are too far past the factory flares, so use good judgement there.