Why/how is my iPhoto library larger than the hard drive it is stored on?

I store my iPhoto library on a 2TB external hard drive. The library file itself claims to be 2.65TB and created 12 years before I purchased the computer (see pic). I have confirmed this on other computers.
I know my library to actually be closer to 680GB as I've been using it for a long time. When I click 'get info' on the drive itself, it shows it is around 945GB full which makes sense as there are other files also stored there.
Could someone please explain how a 2TB drive can hold a 2.65TB file? Then, could someone help me restore it back to its actual size? I would like to back up my library but can't easily move such a massive file. I am also worried about its stability as I presume something is corrupt in there. 
Thanks in advance.
p.s. When you look at the image below, you may notice other libraries (the one in question is highlighted). I have had MANY troubles with crashing libraries and gone through MANY rebuilds to get my library to where it is now; complete and working but oddly sized (and not appropriately backed up!). If I could easily and safely migrate all my photos, their originals, their edits, the places and faces etc to another program I would definitely consider it because iPhoto and Aperture are simply not behaving as I'd like them to.

I am unsure if it has been formatted MacOS but it is a My Passport for Mac so I imagine it was initially set up correctly - especially as it has worked well until now.
You can check that by selecting your external drive in the Finder and using the command "File Get Info ⌘I " on the drive. The General section of the info panel will show you the File System.
I have never seen that symbol in in iPhoto. In Aperture it is marking photos that have been downloaded from Photo Stream or Flickr or Facebook.  Are you syncing your library with any of these services?

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