This has happened to me, twice. My backup plan was to just work, which I've been doing for two years. I have a good job, but nothing I want to stay in long-term (though it is in my field, which is rare without a PhD, so I've been lucky).
A lot of people in the applyingtograd community on LiveJournal mentioned that once they went through a wave of complete rejections they realized that it wasn't the end of the world and it made them less hung up on the whole process. For me, it's only reinforced that this is absolutely the only thing that I want, and that I'll do what I have to to get it.
I've been taking classes to diversify my CV and build up the skills that I let slide during my MA. I presented at a conference, am always on the lookout for new contacts and professional development, and I've become a much smarter, stronger applicant. I think it's made me a stronger person overall as well, though I have to admit that so many rejections from something I want so badly has worn me down, also. It's certainly a mixed bag.
But it *isn't* the end of the world, that's true, and having a plan B is a good idea - even if plan B only shows up well after the final rejection is in.
In the end, I believe things happen for a reason. This time around I'm applying to schools I never dreamed of before - and not lower-level schools, either! (though slightly lower-level in my specialty, they are still world class institutions). Maybe I was just supposed to go somewhere that I didn't give a chance to before. I think there's a place for me somewhere great...
good luck to you all. It's a tough road - acceptance or rejection!