Disk Utility lets you create disk images that are virtual volumes. They’re stored as a file on a disk, but can be mounted and managed just like a directly connected or network-mounted volume. You can even use Disk Utility to create an encrypted version using a popup menu when you select File > New > New Image. (Pick 256-bit AES, as there’s no reason to pick the older format; read more in this older Mac 911 column.)
Problem is, Time Machine won’t back up the contents of disk images. They appear in the Time Machine preference pane when you click Options as grayed-out items in the Exclude These Items from Backups list.
In order to back them up, Time Machine has to copy the disk image file. If you make any change to the contents of a disk image, the entire file winds up copied to Time Machine. That takes system resources and, for any sufficiently large disk image, also causes older versions of files to get dumped more rapidly to keep newer updates that include the changed disk image.
Read more at MacWorld.com