I had an existing USB drive which was already encrypted (at the file-system level) and then I opened Time Machine and also selected "Encrypt backups" when choosing the disk and now I have a very slow progress bar showing "Preparing disk for decryption". I can't cancel it. Why would it be decrypting anything?
Time Machine prepares the drive for storing backups when you set it up. This means, disrupting filesystem-level encryption that wasn't made by Time Machine. If you want encryption on top of Time Machine encryption, it has to be below the filesystem level, or you'll surely lose it in favor of Time Machine. If you want encrypted Time Machine backups, simply enable encrypted backups when setting up Time Machine instead of encrypting in Disk Utility.
This happens when someone turns on FileVault on an external volume. Did you turn it on? If so, and you don't want it, you can turn it off.