This is so confusing. What is the deal with time machine formatted drives and Big Sur?
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Prior to Big Sur, Time Machine used "MacOS Extended Journaled" or "MacOS Extended Journaled Encrypted" (if you were using file vault, to backup your internal computer to an external hard drive. Even though solid state drives were APFS, Catalina and earlier still used Journaled format for backup.

Now that Big Sur has landed, Apple wants to use APFS across the board. So now, if you are using Big Sur, your Time Machine drive will prefer to use APFS or APFS ecrypted if using file vault. Note: I don't recommend using file vault.

Further explanation from Apple:

Yes of disks to be used:
https://support.apple.com/en-ie/guide/mac-help/mh21241/10.15/mac/10.15

Encrypt or unencrypted:
https://support.apple.com/en-hk/guide/mac-help/mh15139/11.0/mac/11.0