but my internal drive has only used about 40GB...
It doesn't just copy your HDD. Initially, it makes a backup of everything, then every hour it checks what has changed - applications, settings, files and folders you've edited, new stuff you've downloaded or installed or whatever - and adds that data to another back up - that's how you can chose when you go back to, not just the most recent backup but beyond that, hour by hour, day by day, week by week.
And that, my friend, can take up a lot of space!