How to setup and backup in Time Machine when there is only one hard drive showing?
You need this:

http://support.apple.com/en-us/HT201250

Main thing: you need any other hard drive, whatever ssd, hdd, connected to mac by wi-fi, thunderbolt or usb.

Time Capsule is just one of the many variants.

You can make your backup on any device that you already have. But make a note that it better should be fully given for backup, no any other sided information on a drive, particularly when encrypting your external drive.