How do I use trackback?

Someone visited my site and did a trackback. I’ve seen the term before, but I never knew what they were talking about.
The way it showed up in my email was that they put in <trackback /> and then some comments. Can someone tell me how I do this, for example if there’s something I see on another site and I want to put a link in my site – do I put in my post a link to the trackback url and also go to their comments and put in my post? Or does that show up in their comments automatically if I put a link to their trackback?
Can someone walk me through how this works? I’ve looked for posts on it but I don’t find any that explain this.
Thanks very much.