time machine - replace backup disk
From your description, it sounds like you have an external hard drive (Seagate brand), which you have been using for your Time Machine backup. You're also saying that the capacity of the external hard drive is the same as your Mac.

As a general guideline, you want the Time Machine's hard drive to be about 1.5x the capacity of the Mac's hard drive. The reason being is that Time Machine stores progressive changes to files, such that you could literally restore one version of a file from a week ago, even though the file had been backed up several times over the week.

With respect to setting up Time Machine again, it sounds like you have a Time Machine backup on the external hard drive, and you're being prompted to restore. If this is confusing to you, then you could simply format the external hard drive, and then designate it for your Time Machine backup.

For all things related to Time Machine backups, and troubleshooting issues related to that, take a look at Pondini's Guides and Tips for Time Machine.