The issue you will run into is that the Time Machine drive needs to be able to store at least 1 copy of every file on your primary (internal) disk so if the internal and external disk are the same size you will quickly run out of space. I tried to use a 80 GB disk on my Mac with a 100 GB internal drive, but only about 40 GB used so 80GB should have been enough for the backup. The backup failed and told me that Time Machine needed more space. 500 GB drives are only $100 right now you should be able to get one pretty easily and cheaply.
Thanks for the replies guys (and ladies if applicable)! I have no idea what it means to format it to HFS+ though??
Also, with time machine, is there a way to set it so it only uses a certain amount of hard drive space? Or can it only be set up to back up the ENTIRE computer? Honestly I don't need it to back up everything forever, but instead just for about a month and then delete. Are there settings that enable the user to do this?