If you have 700GB of data then obviously you need at least 700GB of space to do one full backup. Beyond that the amount of space needed will be dictated by how much changes and how often. Time Machine makes and keeps backups according to the following default schedule
- Hourly backups for the last 24 hours the Mac has been turned on, if it has been on continuously for the last 24 hours that will be 24 backups
- Daily backups for the last month, it is has been on each day for the last month that will be about 30 backups depending on which month
- Weekly backups for as many weeks as the Mac has been running and doing backups, until the backup drive is full, if you have enough space for a year that would be 52 backups
See http://support.apple.com/kb/ht1427
So as a hypothetical total number of backups for one year and assuming the Mac was on every day for that year and there was enough space this would total something like -
24 + (number of days in month) + (number of weeks in a year) = 106
It might actually be a bit less because I am not sure if it keeps daily and weekly backups for the latest/current month, if it does not it might be more like 101.
Now if on average 10% of files change per day then we would need for an entire years backups the following amount
1 x 700GB + (365 x (700GB x 10%)) = 26250GB
In reality you may have far less than 10% change per day, as a comparison lets use 1% changing per day
1 x 700GB + (365 x (700GB x 1%)) = 3255GB
As a minimum Time Machine will try and keep backups for the last day and last month which would be 24 + 30 backups, it then keeps as many weekly backups as will fit. Once it runs out of space it is supposed to automatically throw away the older backups. So if we start from new we have the following numbers of backups (assuming it is running all day everyday and have enough space)
End of day 1 = 24 backups
End of day 2 = 24 + 1 = 25 backups
End of month 1 = 24 + 30 = 54 backups
End of month 2 = 24 + 30 + 1 = 55 backups
End of month 3 = 24 + 30 + 4 = 59 backups
End of month 4 = 24 + 30 + 8 = 63 backups
…
End of month 12 = 24 + 30 + 52 = 106 backups
As far as I can see Time Machine really wants to keep a minimum of an entire day i.e. 24 backups plus an entire month i.e. 30 = 54 backups plus a weekly backup, if you don't have enough space for that i.e. 55 backups then I suspect it will get upset and complain about space regardless of its supposed ability to automatically throw away older backups.
Going back to our space formula, if we estimate a change rate of 1% per day this means I feel Time Machine would need a minimum space of
1 x 700GB + ((1 + 30 + 7) x (700GB x 1%)) = 966GB
However I think it wise to assume it would be happier with a bit more than that for working space etc.
Note: the above reflects one day plus one month (i.e. 30 days) plus one weekly backup i.e. a total of 32 backups, or more importantly the equivalent of 38 days of changes. As we are estimating a daily change rate of 1% the fact there are 24 backups for the latest day makes no difference to the amount changed, you are not changing 1% per hour, but 1% per day, the changes would be merely split in to 24 hourly backups.
This should give you a way of more accurately judging how big a backup drive you need.
If you are finding it is not throwing stuff away then maybe you don't have enough space for the (I feel) minimum of 1 day + 1 month + 1 week, however I also feel as per the following article that sometimes Time Machine just gets confused and unable to throw away older backups. See -
http://www.macworld.co.uk/news/mac/time-machine-says-drive-full-what-should-i-do -3456272/