Encrypted sparse image files are used to secure a user's home directory by the FileVault feature in Mac OS X Snow Leopard and earlier.
Unlike a full image file (.dmg), which takes up as much actual space as the real disk it represents (regardless of the amount of unused space), a sparse image file (.sparseimage) takes up only as much actual disk space as the data contained within, up to a maximum of the capacity assigned during creation.
Two limitations are therefore worth noting regarding the use of this image file format: Mac OS X Leopard introduced the concept of the sparse bundle.
[3] Instead of a single big file, a sparse bundle is a bundle (directory) containing a number of files called bands, each on the order of 8 MB in size.
Sparse bundle advantages over non-diskimage backup for Time Machine: