Trackbacks are used primarily to facilitate communication between blogs; if a blogger writes a new entry commenting on, or referring to, an entry found at another blog, and both blogging tools support the TrackBack protocol, then the commenting blogger can notify the other blog with a “TrackBack ping”; the receiving blog will typically display summaries of, and links to, all the commenting entries below the original entry. This allows for conversations spanning several blogs that readers can easily follow.
This is the Wikipedia definition of trackbacks. Windows Live Spaces supports receiving trackbacks for blog posts, and so I am sending them when I publish a post about one of the entries e.g. in the Windows Live Wire blog. However, I noticed that the trackbacks are not always properly received in Spaces; I am experiencing this is a permanent issue and trackbacks are only now and then received.
Have a look at these two screenshots I took, comparing the WordPress admin dashboard with the originating post at Windows Live Spaces.