Mac Os Monterey time machine back up
I am new to Mac OS. My brand new Mac mini does not have any files (literally) other than some newly installed apps (word, excel etc.) However, the back up size (when trying to back up to external USB) being shown as 37 ish GB. Is this taking a snapshot of the entire system as in if system malfunctions we can restore to the back up or merely copies files (the apps, photos, documents and downloads) generated by me? If it is not backing up system files where are these MB’s coming from?? Also when I attach thenUSB it shows Ex FAT file format. Do I have to convert to APFS or time machine will do this automatically?
Mac mini, macOS 12.1