Backups are for the same system and volume, yes.
The USB TM drive used to be connected to my mac; I'd like to attach it to a network so I have more freedom with my rMBP.
Connecting to the drive by local IP address (rather than the server share's name), TM begins trying to make a backup, creates an 800MB sparsebundle representing my current system, but then stops because it's out of space (currently have a bit less than 100GBs of data on my system (200GB partition size); TM drive is 1.3TB with 75GBs free. Logs from Time Machine buddy:
Starting automatic backup
Attempting to mount network destination URL: afp://pi@192.168.0.183/Time%20Machine%20Backups
Mounted network destination at mount point: /Volumes/Time Machine Backups-1 using URL: afp://pi@192.168.0.183/Time%20Machine%20Backups
Disk image /Volumes/Time Machine Backups-1/MacBook Pro.sparsebundle mounted at: /Volumes/Time Machine Backups 1
Backing up to /dev/disk2s2: /Volumes/Time Machine Backups 1/Backups.backupdb
Forcing deep traversal on source: "Macintosh HD" (device: /dev/disk0s2 mount: '/' fsUUID: XXXXXXXX-5E50-3D17-B858-XXXXXXXXXXXX eventDBUUID: XXXXXXXX-72A0-4E27-8F17-XXXXXXXXXXXX)
Total content size: 95.24 GB excluded items size: 14.16 GB for volume Macintosh HD
Found 1377772 files (81.08 GB) needing backup
97.3 GB required (including padding), 75.7 GB available
Ejected Time Machine disk image: /Volumes/Time Machine Backups-1/MacBook Pro.sparsebundle
Compacting backup disk image to recover free space
Failed to compact disk image, DIHLDiskImageCompact returned: 78
Not starting automatic Time Machine backup: Computer is on battery power.
Compacting backup disk image to recover free space
Failed to compact disk image, DIHLDiskImageCompact returned: 78
Not starting automatic Time Machine backup: Computer is on battery power.
Compacting backup disk image to recover free space
At that point, I get a notification that it fails. Clicking on Details opens up the Pref. pane and says there's not enough space. Looks like it's attempting to backup, but not picking up from the old backups.