It's not a file, it's just a folder, and in that folder is a copy of all your files, more or less arranged exactly as they were on your system. There's some behind the scenes Unix filesystem magic being worked so that it doesn't keep more than one copy of a file unless that file has changed, but it's all completely transparent to the user. You don't even need to use the time machine interface, you can just go in and grab files/folders via Finder if you'd prefer.
I forget the exact name, and sadly my external time machine backup drive died the other day, so I can't go and look it up for you, but it should be pretty obvious when you go and actually look.
What is the name or format of a TimeMachine backup file made in Leopard saved to an external drive?

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