OS X Lion: Disks you can use with Time Machine
You can use Time Machine with a Time Capsule, and with USB, FireWire, and Thunderbolt disks. The backup disk can be directly connected to your computer or be on a network. If the backup disk has been divided into partitions, you can use one of the partitions.
Time Machine can’t back up to an external disk connected to an AirPort Extreme, or to an iPod, iDisk, or disk formatted for Windows.
The most common format for a Time Machine backup disk is Mac OS Extended (Journaled) format, but Time Machine also supports Mac OS Extended (Case sensitive, Journaled) and XSan formats.
If the disk is partitioned using the Master Boot Record (MBR) partition type, some partitions may not be available for use with Time Machine. The GUID Partition Table (GPT) partition type is recommended.
If your backup disk is on a network, the network server must use Apple File Protocol (AFP) file sharing, and both your computer, and the networked backup disk, should have Mac OS X 10.5.6 or later. The AFP disk must also be “mounted” (available to your computer).