Best, because only Apple has produced a backup solution that regular people can and will use. Apple pushes Time Machine (or Time Capsule) use -- for the benefit of Appel customers.
Worst because TM and TC are virtually undocumented, they are ill-suited for geek use (no encrypted offsite option), and they are somewhat unreliable .
Today I ran into examples of both, and learned two things:
- If you attach an external drive to a Time Capsule, then Time Machine will treat it much like an internal TC drive. This is not documented, and at least in 2008 TM backup to an AirPort Extreme drive was not reliable and not supported.
- You can't do a TM backup to USB attached drive, then move the drive to a Time Capsule and continue the backup over WiFi. This sucks.
I learned these things because the 500GB drive on my Time Capsule ran out of free space. I'd already excluded significant bits of my machines from TM backup  and reclaimed space so I had to try a different approach. I noticed that the barely used 2TB USB drive attached to my TC displays to TM as an acceptable backup option. Despite past issues, I decided to try using the external drive for my server/iMac and keep the internal drive for my our other Macs. 
First I brought the drive to my iMac, erased it with Disk Utility, and connected it as a regular TM managed drive. I then took it upstairs, connected it to the TC, and tried to resume the backup. That didn't work. It turns out TM handles a local disk differently from a TC hosted disk:
- Local disk: TM writes directly to the disk.
- Time Capsule disk (internal or external): TM first creates a sparse disk image, then writes to it.
So when I moved the disk to the TC, my iMac Time Machine.app just started a new (350GB) backup. One that would take days to complete, leaving with only one working backup method instead of my usual redundant backups .
The plus side of the sparse disk image approach is that I can use that TC mounted external drive as a file server as well as a TM backup, which is rather handy. That doesn't make up for the relocation hassle.
So now I have two options:
- Allow TM to start the backup over WiFi. Then bring the disk downstairs. Mount the disk image locally, and see if TM will continue that backup.
- Bring the TC with external drive to my iMac and backup via GB ethernet. That will compete in a single night, but it will mean we'll be without WiFi until I can put things back.
I'll update the post with which of these two work. I know the 2nd one will work ...
Update: Option 1 doesn't work. I don't have permissions to access the disk image. I could change permissions, but in my OS X experience this is a very risky thing. I could go with the ethernet option, but that's a PITA to move about. I'll try letting my backups chug along for a week or so. I'll start by excluding everything but the Users folder, then let TC gradually fill out the rest over time. If it's too slow, I'll do the ethernet thing.
Update 3/3/11: After about 30 hours TM backed up about 350GB to the WiFi via 802.11n. I never bothered with gB ethernet. The sparse bundle file was set originally at 600GB, even though I only backed up 300GB. I think the initial setting was based on ALL the data on my iMac drive rather; it didn't account for my initially excluding some folders. Later, when I included all data in the backup, it didn't take up any additional storage.
- fn -
 Of course I've never used a backup solution that was truly reliable. Even in its glory days Retrospect took some care and feeding.
 I also use SuperDuper to clone my primary machine/server nightly to an encrypted disk image and clone my MacBook every month or so. Two SD clones rotate offsite. So I use two completely different backup methods with my data including an offsite option. If Retrospect were to be miraculously resurrected I'd use that instead of SuperDuper. I've evaluated many other popular OS X backup options and failed them all.
 I left the TC disk image holding my iMac backup in place. I'll delete it later if all goes well.
- Freeing up Time Capsule space – and documentation for Time Machine and Time Capsule (12/2009): A pretty complete set of 2009 references, including ways to free up space.
- Gordon's Tech: Time Machine, Time Capsule and offsite backup (2/2010): Using encrypted disk images for offsite backup. I haven't tried this.
- Gordon's Tech: Time Machine - Unable to Complete Backup bug on Time Capsule (2/2010): fixes for an annoying bug
- Gordon's Tech: Time Machine: Fail first, then flaw discovered (12/2009: Permissions bug blocks backup)
- using FSevents for backup - is it reliable enough? (1/2011) - under some conditions a Time Machine backup will omit file versions or files. It's a deep bug.
- TidBITS Networking: Time Machine via AirPort Disk Is Unsupported, Apple Says (4/2008) ... "This option to choose an AirPort Extreme-connected drive first appeared with the release of several related firmware, driver, and operating system updates on 19-Mar-08 (see "AirPort Update Extends Time Capsule, Adds AirDisk Support," 2008-03-19). I speculated at the time that this addition was an error on Apple's part, perhaps due to a debugging feature left turned on that wasn't properly turned off before the updates shipped. This was buttressed in part by the way in which Time Capsule drives - whether an internal drive or ones connected externally via USB - appear via Bonjour in a list of selectable volumes when setting up Time Machine, but AirPort Extreme disks do not."