As far as I know, It can be wired and/or wireless. You have an option to configure this in Time Machine Preferences on your Mac. I think if you have it wired, it will automatically sync through the Ethernet cable.
I also use wired back up, because it is faster, more efficient, and less hassle. However if you're Time Capsules cannot be away from your computer wireless is still a good option because it runs in the background.