Terms like “tracking” can paint a lot of negative images when it comes to things like user privacy. When they say “track,” they mean that they’re recording a users behavior within the application. Recording generally refers to sending a message to an analytics service when a user does something.
When something happens in an application, they record it. Most of the services show you a reverse chronological timeline of events denoting some sort of user behavior. They can see things like user “Tapped the signup button” three days ago or “Cancelled subscription” 20 minutes ago. These types of events on a timeline will show a very specific set of behaviors that you can use analyze and later change your app with such data in mind. For example, if user created five to do items in your planner app and then cancelled his account the next day, they can gather that something about the product didn’t meet user’s needs.
This is where tracking can become incredibly valuable: identifying pitfalls in the successful usage of an app. With this sort of information, you can do proactive things like contact a specific user to ask about their cancellation and attempt to keep them as a customer. They can also do things like identify trouble areas in an app and determine where to focus efforts.
Like anything, tracking is good in moderation. Better yet, tracking is good when the purpose behind that tracking is well-informed.