The backup generates a single file as Solene mentioned earlier. And yes, the target has tbe formatted and mounted. The only consideration is that the target file system should support huge backup files (unless you are doing a partial backup). And it should be taken into consideration that if the target is formatted as FAT32 (like many flash drives), it will have a 4GiB limit of a single file. And full backup will most probably fail.
The medium needs to be formatted - Qubes will not automatically format
or remove data.
As pointed out, the medium (whether external or in a qube) needs to be
formatted and mounted ,and the target location needs to be writable by the user account.
I never presume to speak for the Qubes team.
When I comment in the Forum I speak for myself.