The Time library always uses the Arduino millisecond timer stuff and is meant to sync to an "external" source. To the Time lib, the RTC is considered external, which can be a little confusing since it's built into the chip. If you keep in mind the Time lib was originally designed for syncing to a variety of sources like GPS or internet NTP (network time protocol), then it usually makes good sense.
Just remember, the Time library syncs to the RTC, rather than accessing it directly.
And of course you need to add a 3V coin cell to VBAT if you want the RTC to keep the date/time while main power is off.