The way I see it, the size of the backup drive in itself doesn't matter, but how it compares to the size of the workdrives (I consider it obvious that backup drives are NOT smaller than workdrives :o)
I keep my backup drives at least double the size of my workdrives. I have 500 Gb HDDs in my computer, the backup ones are 1-1,5 Tb. If I bought 1 Tb internals I'd get 2-4 Tb backup drives.

I think that way it's easier to use incremental backup method, when the using age of the  backup drive is clearly longer than that of the workdrive.