Time Machine can back up FROM:

1. Any internal or directly-connected (USB, FireWire, Thunderbolt, eSATA) drive/partition formatted with any variation of Mac OSX Extended (HFS+). 
   

2. In most cases, by default it will:
   

3. •Include all internal HFS+ disks/partitions (including externals connected via eSATA)
   

4. •Exclude all external disks/partitions, including the one it's backing-up to (but not those connected via eSATA)
   

5. You can easily modify the handling of individual HFS+ volumes.  See question #10.
   

6. It can easily back up multiple Macs.  See question #4 for details.
   

7. It can easily back up multiple drives/partitions on a single Mac.  See question #32 for details.
   

8. It will back-up your entire system (OSX, configuration, applications, user data, settings, preferences, etc. (less most system work files, caches, logs, trash, etc.), unless you specifically exclude things (see question #10  and/or  question #11).
   

9. It cannot back up a Boot Camp or other Windows-formatted volume.   The WinClone app  may work for that, or check the Apple Discussions Boot Camp forum.
   

10. It cannot back up a USB thumb drive.
    

11. It cannot back up any network drive, including a Time Capsule,  a USB drive connected to a Time Capsule or Airport Extreme, or a Network Attached Storage (NAS) device.  The CarbonCopyCloner ($40 U.S. with 30-day free trial) or ChronoSync apps (about $40 U.S.) may be alternatives.

The Local and Network Drives mentioned above are essentially "dumb receivers" -- they use the File System and other features of OSX on your Mac, at the direction of your Mac.

But a NAS drive (Network Attached Storage, also called a network drive) has its own proprietary operating system (it's actually a small special-purpose computer), and is not under the direct control of your Mac. 

You can't format or partition it via Disk Utility on your Mac, and you might not be able to repair your backups that way, either.  You must use whatever utilities are provided by the maker of the NAS.  And, of course, they're different for each maker, and sometimes for different hardware or software from the same maker.  That's why there are no setup instructions for them here;  those are specific to the NAS.

These are great for the purposes they were designed for, but that rarely includes working with Time Machine -- it has unique, complex requirements;  working with it seems to be an "add-on" feature that some makers may not get quite right.  Most NASs use the SMB communications protocol to talk to Windows and Macs.  But Time Machine requires a different protocol, AFP file sharing. 

Time Machine can back up to some NAS drives, but only those that meet the criteria specified in this Apple article:  Disks that can be used with Time Machine.  The technical details of one part are documented in Time Machine Network Interface Specification.  Especially if the error detection, correction, and notification in those specifications aren't handled exactly right by the NAS, it may work, or seem to work, for a while, but eventually fail or corrupt the backups.

Be very careful here:  just because a 3rd-party vendor claims to support Time Machine doesn't necessarily mean that Apple supports that configuration, or that it will work reliably in all circumstances (many won't).

Before buying one of these, carefully investigate the following:

1. •If you’re planning to use the NAS for other data, in addition to your Time Machine backups, be sure you can partition it (or set up separate "shares" or "accounts" via the NAS, since you can’t with Apple’s Disk Utility), or somehow limit the amount of space the backups can use.  Otherwise the backups will, eventually,  use all the available empty space, possibly leading to conflicts.  See  question #3  for details.
   

2. •Look at the setup instructions.  If there’s any mention of a Terminal command involving "unsupported devices," or installation of drivers or kernel extensions to fool Time Machine into thinking it’s a locally-connected drive, use caution.  These may prevent you from doing a full system restore to a new or replaced internal hard drive.  This is because OSX doesn’t do a full system restore;  it’s done by booting up from your Recovery HD (Lion and later) or OSX Install disc (Snow Leopard or Leopard) and using the the Installer utility on it.  That utility won’t have those additions, and you can't add them to it;  thus it may not be able to connect to your backups when you need them the most.  (See question #14 for details on doing a full restore.)
   

3. •Consider whether the maker is reputable and likely to continue supporting the NAS for as long as you'll be using it.  If Apple changes requirements, will the maker update the NAS so it will work with the new version of OSX?  Many that worked on Snow Leopard didn't work on Lion without such updates.  A few weren't updated for quite a while, and some never were.
   

Each NAS maker has its own requirements, limitations, and/or setup procedures.  Some require special drivers, passwords, etc.  All these things can make recovery, especially a full restore after your Mac's startup drive fails, very difficult.  Adding complexity is rarely a good thing.

And when there's trouble, is it your Mac or the NAS?  It may be hard to tell, and the support folks will tend to point the finger at each other.    Apple can't help much, as they don't have the 3rd-party hardware, or training, or experience, with them.  Unless you're technically-proficient, think long and hard about how you'll recover if there's a problem.

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