Very simply, traceroute is a utility that shows you a route your packets will take to get from point A (probably your house or work) to point B (say,
www.google.com).
Say you are surfing to the web. First you go to google, which is located in California. Then you go to
www.linux.de, which (I think) is in Germany. You suppose that sound engineering principles are used to route packets from your computer to those remote computers- it's not magic! :-)
How are they routed? ...Not so simple. Where are they routed? Traceroute will show you. However, traceroute is a snapshot of *a* route your packets *may* take. It's not guaranteed to be *the* route your packets are taking *right now*. In other words, if you go to
www.google.com, a moment later run traceroute
www.google.com, then a moment later go to
www.google.com (again in your web browser), your packets did not necessarily all go through the same devices each time. However, traceroute gives you a good general idea about where your network packets are flying in the wondrous ether of the Internet.
-Mike