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I'd like to get a 2TB external USB drive and put Time Machine backups for 3 different Macs on it.

Is there any configuration I need to do for this? Or do I just start a new TM backup on Mac 1, wait till it finishes, disconnect the USB drive, move on to Mac 2 and repeat?

In other words, will Mac 1 take the entire USB disk for itself or something of that nature?

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Yes, sharing a single drive amongst several Macs is doable. For more details, here are some resources to review:

  • This Apple.SE question may provides some pointers, such as not using File Vault 2 when sharing the drive with Macs running OS X prior to Lion.
  • Another Apple.SE question provides some suggestions for network backup.
  • Other discussions (such as this post) recommend using multiple partitions on the shared drive.
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