You'll need to connect some sort of an external storage, such as an external hard drive to utilize the backup (you can potentially partition your internal drive, but that doesn't help in case of a drive failure, so I wouldn’t recommend it).
When you connect an external drive, you should get a prompt asking whether you want to use it for time machine backup. Alternatively you can access the settings by going to Apple menu > System Preferences > Time Machine, selecting external drive, and clicking Use Disk.
Once the drive is designated to Time Machine it will start the backup process. The first backup will take a while. If the drive stays on and connected Time Machine will continue to backup data changes on an hourly bases or as scheduled.
You can also do a manual backup by clicking on the Time Machine icon (top right) and selecting Back Up Now.
Backups are incremental, by default Time Machine keeps an hourly backup of the last 24 hours, daily backups of the last month, and weekly backups of the rest.
You can then retrieve individual file from the Time Machine backup based on a timeline. You can also do a complete restore form the backup through the recovery tool, and transfer your profile to another Mac through Migration assistant.