Using Time Machine to back up your Windows virtual machine is one of the easiest ways to keep your computer safe.

If Time Machine is set up on your computer Parallels Desktop detects it and adds you virtual machine to backup schedule.

Parallels Desktop for Mac includes improved integration with Time Machine. When your machine is backed up, only the most recent changes are saved (the latest snapshot), so the backup process takes less time and uses less space on your Time Machine storage device.

To enable improved integration with Time Machine open Windows virtual machine's configuration > Backup tab > enable SmartGuard option.

To exclude your Windows virtual machine from backups open its configuration > Backup tab > click on Open Time Machine Preferences.

You will see the Time Machine where you can add your virtual machine to the exclusions list.

To learn more about the SmartGuard feature, please refer to KB 115052.

To restore your virtual machine after a Time Machine backup, please follow the instructions in this Apple KB article: HT1427.