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Time machine does not do diffs, and I thought that was a bad thing too (backups take more space for sure, etc.). Until you actually start using it and you realize that the way Time Machine does things is actually ingenious and very useful.
Every backup is a complete copy of your hard drive using hard links, so you can browse any previous state of your system using the Finder without using Time Machine. Also applications such as iPhoto and Adress Book (and any other) can show you previous states in *real time*! This would simply not be possible using diffs. So yes it would save more space, but then again recovery would be slow, impractical and you would have to use Apple's solution to recover file (in the current way, you could restore your files manually or eventually through a 3rd party solution, Time Machine is just a GUI but is not necessary to restore your files because no undiff is needed). It's brilliant and it's the way that personal backups should be implemented (but perhaps not corporate backups). So I give it full points and more.