Confused about Time machine

Will time machine compress the backups of your data? Because if not wouldn't you need a pretty big external, and if it does, is it a decent compression rate?

I'm guessing it works similar to MA Volume Shadow Copy services. Since I haven't used 10.5 this is just an assumption.

It would only back up the delta changes to files versus whole new versions thus saving space. I'm also guessing that there is a time to live option. If you're HD is 500gb and your backup drive is 500gb obviously just filling up you first HD you'd approach problems. So you either tell it that time machine can remove items over one month or something like that, and on the flip side you might get a messege that says "get more HD space" or "you're running out of time" ).

yeah ive always wondered that, wont data that is really old have to be compressed or whatever. I think that with time machine, ex hard drive is the best to go. but id still just go one month delete or somthing