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Does built in Windows 7 backup perform differential (incremental) backups?

I am asking this question because the drive I have allocated for said utility to use as backup space is quickly filling (it's a 500GB drive) and this is unexpected to me since the amount of data I produce daily is very little (totally insignificant compared to the rate of use on said drive).

I have configured the utility to backup daily, at time t. The drive in question is a removable drive but it remains connected to the machine. I assume the answer to my question will note if the utility writes over the last backup when making a new one, or if it keeps all backups, etc.

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It sounds like you are using the wrong backup type.

If you are using the "daily backup" that is the source of the excessive size. A daily backup copies all selected files that have been modified the day the daily backup is performed. The backed-up files are not marked as having been backed up (in other words, the archive attribute is not cleared).

This means every backup you do, causes all the previous data to be backed up as well.

Typically in a scenario where you want to backup your data daily, you want to do a Normal backup on Monday and then an Incremental backup for the rest of the week.

A normal backup copies all selected files and marks each file as having been backed up (in other words, the archive attribute is cleared). With normal backups, you need only the most recent copy of the backup file or tape to restore all of the files. You usually perform a normal backup the first time you create a backup set.

An incremental backup backs up only those files created or changed since the last normal or incremental backup. It marks files as having been backed up (in other words, the archive attribute is cleared). If you use a combination of normal and incremental backups, you will need to have the last normal backup set as well as all incremental backup sets in order to restore your data.

When there is a loss of data, you would restore the normal backup, then the incrementals to get to return to the most current data.

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