Recomended size for Time Capsule Drive

If I have only one mac using Time machine and it has a 500 gig hard drive, how big a drive should I use on my Time Capsule for optimum use from it?

Im going to guess the back up drive should be at least the same size as the drive it has to back up. Sounds obvious I know but for all I know the forward thinking Apple may lead the way with magical compression techniques etc.

Or should the drive be twice the size to allow for elbow room or whatever?

Even better if backup drive is larger say 1TB or even 2TB depending on prices.

It has to be big enough to at least do 2 backups because if you only get 1 backup done there must be enough room to do another backup and they will replace one another each time. If the drive is same size as machine being backed up you will only be able to do 1 backup only..