In its current incarnation, the Time Machine app is mostly compatible with APFS; that is, you can back up an APFS formatted drive using Time Machine, as well as restore files from a Time Machine backup to an APFS formatted drive. However, there are some very important caveats that Time Machine users should be aware of.
Time Machine drives must be formatted in HFS+ (a file system released with Mac OS 8.1 in 1998 and found on every version of macOS since then). Time Machine uses the magic of hard links, a feature that HFS+ file systems have to catalog and keep track of which files in a backup make up the current version of an app, document, or directory.
APFS, on the other hand, does not support hard links. When you convert an HFS+ formatted volume to APFS, any hard links found during the conversion process are automatically changed to symbolic links, thus breaking your Time Machine backup into a collection of almost useless files.
Luckily, installing macOS High Sierra won’t automatically convert Time Machine drives to APFS, but it’s possible to accidentally change the drive’s format to APFS from within Disk Utility. You’d think Disk Utility would detect the Time Machine backup and stop you, but it doesn’t. You can also convert a drive to APFS without macOS warning if you use the Finder option to encrypt a drive in High Sierra (macOS will convert the format to APFS before encrypting the drive).
If you do accidentally convert a Time Machine drive to APFS, the Time Machine app will no longer recognize the drive as a backup drive. If you select the old Time Machine drive within the Time Machine app as a backup destination, you’ll be confronted with an option to erase all of the content on the selected drive and reformat it as HFS+.
Until Apple releases a new version of Time Machine that makes use of the APFS feature set, such as snapshots to replace file linking, your Time Machine backup must remain formatted as HFS+.