Time Machine can back up to another volume on your network, just not a USB hard drive connected to your AirPort Extreme router.

As of press time, Time Machine does not support AirPort Extreme’s AirPort Disk feature, so you can’t currently use Time Machine to back up wirelessly to a USB hard drive plugged into an AirPort Extreme. Instead, Apple would like you to purchase Time Capsule ($299 for 500GB, $499 for 1TB), which is an AirPort Extreme with an integrated hard drive inside of it specifically designed for wireless Time Machine backups.

However, you can use Time Machine to backup your files—wirelessly or over Ethernet—to another Mac running Leopard that has Personal File Sharing turned on (System Preferences > Sharing), to a volume attached to that Mac, to a Leopard Server volume, or to an Xsan storage device. Just be sure that any volume you want as a Time Machine backup volume is formatted as Mac OS Extended with Access Control Lists enabled.