If you look at the Console when you are running Time Machine, you almost see nothing more than just what the process name is, when it started, and how much data there is going to be backed up. However, I found a way to monitor a bit more about what is actually going on -- what files are copied, etc.

If you installed the Developer Tools, and you should, since there are all kind of little gems hidden there, you will find a program called Instruments within the Developer/Applications folder. With this program, you can monitor all kinds of things that are happening. In my case, I chose the File Activity option on the startup screen, and then used the Attach Process button to atatch the backupd unix application (this is the actual Time Machine backup at work). Click the Record button, and lo and behold, you have a more precise view of the files being copied. Instruments can do lots more, obviously; this is but one example of how to put it to use.