Good question. I've only had it set up for a few months and so far Time Machine is only using 660 GB of my 2 TB SSD, backing up my MacBook's 512GB internal drive.

So Time Machine is pretty space-efficient, but it will keep growing over time until it fills the entire backup drive since there is no limit on how old the backups it keeps can be[1]. I guess when it starts filling up I will just manually delete some old backups to free up space if I need it. Apparently, another alternative is to limit the size (set quota) of Time Machine's backup volume in Disk Utility.

[1] Personally I wish this could be configured. I don't really care much about keeping old files, I just want to make sure I have a recent backup just in case my MacBook gets lost or stolen or it's SSD fails...

The way I set mine up is the Time Machine section of the drive has a quota capped at 1.5x the size of my internal drive, unfortunately you can’t edit quotas without formatting the drive. (Is there any functional difference between a quota and a partition then…? Weird…)

Yeah, that's annoying that you can't edit quotas. But they are functionally different to a partition because the quota just limits the maximum size of the volume. If it's not filled to its quota, any unused space is still available for other volumes to use.