Why TimeMachine defaults to case sensitive?

Solution 1:

Case-sensitive and -insensitive filesystems under OS X are a mess (to say the least), primarily because some well-known and big software companies require their software to be installed on an case-insensitive filesystem. Otherwise these applications wouldn't really work because accessing IMPORTANT-RESOURCE.jpg would never work with a file named important-resource.jpg on disk.

OTOH for TM backups this is not really important because you will never run an application directly from your TimeMachine drive. Using a case-sensitive filesystem in that case covers both possible options without negative impact.

Solution 2:

A case sensitive file system is guaranteed compatible to store data from another case sensitive and case insensitive file system. Apple chose case sensitivity for Time Machine, so that it can incorporate backups from both types of file systems.

Example: - Suppose you have a case sensitive file system, which has FILE1 and file1. You cannot copy those files side by side to a case insensitive file system, as the latter would see those files as one and the same file. - Suppose you have a case insensitive file system: you cannot create FILE1 and file1 side by side. So you can copy all your files to a case sensitive file system.

That is a good choice unless you do not want third party applications to find their files as they might not find them if typed incorrectly (wrong case).