Microsoft Windows Server 2012 - Backup in Windows Server 2012 R2

I have 2 questions about Windows Server Backup, i.e. Windows Backup on 2012 R2 Servers.

1. Well, the program makes the first full backup and then an incremental one. As you know, with this principle of backups, the system needs to recover a given file, i.e. it will use the full backup + all incremental copies until the day from which we want to recover the data.
So what if the space on the target disk will run out from the copy? After all, the program cannot delete the copy from the end because then it will not be possible to recover the file we are interested in from the past, so it cannot work "loop"?

2. I have 3 Hyper-V virtual machines on the server, one of which is located in the default path on the C: \ Users \ Public \ Documents \ Hyper-V drive, and the other two on a separate partition, which is used only for storing virtual machines.
There is no Hyper-V module in the Windows Server Backup wizard which is responsible for copies of virtual machines. But is it enough to mark here: Host Component and all virtuals and the system will backup the machines regardless of their location (path) or do I have to select a separate partition where vhd is stored?

arek_f wrote:

the program makes the first full and then incremental backup

Are you backing up to a local or network drive or to a dedicated hard drive?
In the first case, it is not possible to choose the type of backup, i.e. one full copy is stored, and the program itself decides whether to make a full backup or send only differential data.

USB drive only for backup, i.e. dedicated.

https://technet.microsoft.com/en-us/library/cc753528.aspx
"if you use a disk or volume to store backups, Windows Server Backup automatically deletes older backups as a storage location becomes full."

Hmm, it's just interesting how they technically solved it, since the oldest copies are deleted, but only the first one is full, all subsequent ones are incremental.