you have to set it up using the airport utility. Also you need to start a new time machine backup. Existing backups through USB or Firewire will not work
There's a great thread on here somewhere about wireless time machine backups using the Ariport Extreme that was instrumental in getting mine set up.
The most important trick for me was to open a file on the backup drive with the computer that will use it for backups. Then, while any file is open in finder, use the Time Machine Preferences menu to select the drive. I think since there is a finder window open, the Time Machine program was able to "see" the drive plugged into the Airport Extreme.
Good luck to you! I got mine set up and was immediately given a 500 GB Time Capsule. I was able to re-purpose my 1TB drive for media and not just time machine backups.
EDIT: Here's the link to that thread I mentioned:
https://forums.macrumors.com/threads/457214/
Post #165 (the quoted portion) is what got me sorted. Good luck!