What size should external back-up drive be for use with Time Machine?

I am very new to Macs.
My iMac has a 500GB hard disc - not much on it yet.
I want to back the hard disc up daily and automatically to an external hard drive using Time Machine. So that I could restore everything if the iMac failed.
1. Does the external hard drive that I buy need to be larger than the iMac's hard disc, e.g 1Tb? Or is 500Gb enough in my case?
2. Should it be pre-formatted for Mac when I buy it? Or do I have to do this?
3. Should it use firewire or USB?
4. Presumably I need to leave the external drive plugged in all the time? Or will this stop the iMac from switching on and off?
I really want the easiest solution possible as I am not very techie and I want the minimum amount of fiddling with it. So I am confused between whether to choose a Western Digital My Book Office edition or Studio edition, 500Gb or 1TB, firewire or USB, or maybe a Lacie?
Would be grateful for advice.
Thanks very much.

Welcome to the Apple forums. If you have a 500G external disk, that will work fine for quite a while with hourly, daily and weekly backups, but sooner or later it will fill up, but then it begins to delete weekly backups. The same will happen with whichever size of external disk you buy: sooner or later. . . . Nonetheless, that disk will be fine for most purposes. I have 250G and use a 200G partition for my MacBook Pro and while that was fine, it tends to delete weekly backups so I have about 6 months of backups stored. (I also make other backups of all data).
It may be preformatted, but that is unlikely. Use Disk Utility (in Applications>Utilities) and use MacOS Extended, which is selected in the Partition tab (you do this even if you only use a single partition).
The system works with either Firewire or USB 2..
You do not need to leave it in all the time. If it is connected, it will make the backups, if not, nothing will happen and it will indicate that the next backup will occur when the disk is attached. To disconnect, you would highlight the disk in a Finder panel and press the Eject icon (not while TM is running of course) then disconnect the cable.
I am not able to suggest which disk is best, although my LaCie one has not missed a beat. Others may have a different idea. Try a Google search with the disk manufacturer's name and "problems" or somesuch. No disk is perfect of course.

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