A defendant is traced by cross-matching identifiers you already hold — full name, date of birth, former addresses, telephone numbers — against consumer credit, electoral, property and mortality data, then corroborating the strongest match with a second independent source before it is reported.
The legal reason this matters is CPR 6.9(3): where you have reason to believe a defendant no longer lives at their last known residence, you must take reasonable steps to ascertain the current address before relying on it. A dated, sourced trace report is the evidence of those reasonable steps, and it is what supports an application under CPR 6.15 if no address can be found.