I've used an Apple Time Capsule to back up mine and Jude's MacBooks for a couple years.  It worked very well — accepting a Time Machine incremental backup every hour from the two laptops — until May, when it shut itself off and wouldn't stay on when plugged in. 

Fortunately, I had a backup of the Time Capsule.  I had read an article on TidBITS in March that described a pattern of failures in TCs, and that compelled me to buy a disk at Fry's and make an archive of the TC. 

I finally spent some time last weekend to try and diagnose the problem.  I read on the Time Capsule Memorial Register that Apple has been replacing Time Capsules at no charge, even when they are out of warranty like mine.  So I called Apple's support line, walked through some steps with the conscientious support person, and they decided to ship me a replacement. 

I wanted to restore the new Time Capsule from the archive I had made of the old one.  I was surprised that Apple didn't put any UI in Airport Utility to do so — you can easily archive a TC to a USB disk, but not restore from one.  Though the process isn't clearly documented anywhere, I followed a tip on an Apple Support Discussion and worked it out.

1. Mount the USB backup disk to a Mac. Then mount the new Time Capsule's "Data" volume to the same Mac.  Make sure Time Machine is turned off on all clients to prevent any machines from trying a backup during the restore process.
2. Copy the .sparsebundle files from the backup to the TC.  (The note on Apple's site mentions changing the size of the .sparsebundle disk images, but I didn't do that.)
3. Next set up the Mac to use the new Time Capsule as their backup and archive server.  It's tricky, beause Macs that backed up to the old TC will not recognize the new one automatically.  I got them to accept the new TC with three steps:
• Mount the TC's "Data" volume on the Mac, and then mount the .sparsebundle.
• Open the Time Machine system preference, press Select Disk, and choose the Data volume for the time capsule.
• Launch Time Machine, and browse the old backups.  You should see the normal TM timescale up through the date you made the TC archive.
4. Tell Time Machine to perform a backup. (I actually had to tell it twice to start backing up — it failed partway through the first attempt.)

Now my new Time Machine is doing its regular backups, and my Macs have easy access to their two years of archives.