Trackback is a means for one Web page to let another Web page know that it's been linked to. If that sounds simple but confusing, here's an example usage.
Let's say Wendy writes a post on her Web site and enables Trackbacks** on that post. In essence, what Wendy has done is said, "ok, I've said something and now I'm listening."
Fred reads Wendy's post. He writes a post on his site that links to Wendy's post. Fred can then send Wendy's post a Trackback ping that contains information about Fred's post. In essence, Fred is saying, "hey Wendy, I heard what you said and here's my response."
Since it is Trackback-enabled, Wendy's post is then modified to include a link to Fred's response. In this way, Wendy can aggregate responses to her post, people who have read Wendy's post have a way of letting her know they've responded, and anyone who reads Wendy's post can click through and read those responses.
There are a few more options that complicate matters (I've left out those details), but that's the gist of Trackback.
** You need a bit of software to enable Trackbacks on your site. Check out this beginner's guide to Trackback for suggestions and more information.