Tracing is a method to record everything a process does in a verbose mode so we can see exactly what a process is doing. There are different components that we might require to see and read the trace logs if the error description we are receiving is not very useful. For example, getting an error such as Generic SQL Error occur is not helpful, and we need to discover what is happening behind the scenes to understand what is causing the problem.
CRM Trace can be enabled by touching some registry keys on the server as explained in this KB (http://support.microsoft.com/kb/907490). However, the safest and easiest way to enable the trace is by using Diagnostics Tool for Microsoft Dynamics CRM 2011 that my fellow Microsoft MVP, Tanguy Touzard created and published on CodePlex. This tool can be downloaded from http://crmdiagtool2011.codeplex.com/, and when we run it, we will see a window similar to the following screenshot: