[deathcakes]

Actually I think you'll find it makes use of hard links to files. Its basically a reimplementation of rdiff-backup, or it might be the other way round. I can assure you that no directories get hard linked, and I'm sure someone will furnish the obligatory xkcd.

Edit -- I stand corrected! It does in fact link folders as well. Also: http://xkcd.com/981/

[astrodust]

It hard-links directories, which is non-standard but supported by HFS+. It's kind of crazy to do in general, but in this specific use case it's a great idea.

[deathcakes]

Agreed - having read up a bit on how it works I have to say that its a pretty neat trick.