Index: drush_pm.module
===================================================================
--- drush_pm.module	(revision 2)
+++ drush_pm.module	(working copy)
@@ -276,7 +276,12 @@
     
     $skip_backup = module_invoke_all('drush_pm_skip_backup', $source);
     if (!count($skip_backup)) {
-      $backup_dir = DRUSH_DRUPAL_ROOT. '/backup';
+//      $backup_dir = DRUSH_DRUPAL_ROOT. '/backup';
+      $arrProjectPath = explode('/', $project['path']);
+      array_pop($arrProjectPath);
+      array_pop($arrProjectPath);
+      $arrProjectPath[] = "backup";
+      $backup_dir = DRUSH_DRUPAL_ROOT. '/'. implode('/', $arrProjectPath);
       drush_op('mkdir', $backup_dir, 0777);
       $backup_dir .= '/modules';
       drush_op('mkdir', $backup_dir, 0777);