Does my Time Machine backup disc need to be dedicated?

I have an external HD that's about 60% full. The remaining space is more than enough for a Time Machine backup of my hard drive. If I enable Time Machine using that disc, will it erase my existing files, or just use the free space?

If you want an encrypted backup, Time Machine will erase the contents on the drive as part of the encryption process. (It is a full disk encryption.) In that case, yes, you'll need a dedicated blank drive.

No, it does not. It creates a Backups.backupdb/ directory for itself and leaves your other files untouched.

However, if (on Lion) you want to encrypt your backup it uses the same full-disc encryption as FileVault, and I think your other files on the disc will also be subject to that. (I haven't tried this myself.)

It will require you to erase the disk if it doesn't like the format of the disk. In this case, I have an ExFAT disk that has 7.5TB and even unencrypted, it requires me to erase it. It requires HFS+ or AFS.

If I click "Don't Erase" then it takes me back to the home screen and nothing happens.