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Traction control is a little different from every manufacturer. In a nutshell, the car's wheel speed sensors tell the computer if one wheel or both wheels are accelerating faster than expected. This gets translated as a slipping wheel in a low traction situation.
To counter the excessive acceleration, the engine's timing may be altered, the e-gas may close the throttle, or one or both of the rear brakes may be activated. This is not only used as a traction enhancement tool for straight line acceleration in slippery conditions, but it also serves as a kind of limited slip differential, slowing the speed of the inner wheel during a turn to enhance cornering stability.
The drawback to all this, if you haven't already surmised, is that all of the actions of traction control are to somehow slow down a wheel or two. That robs the car of power under track conditions, which is undesirable. It also tends to force the car to dynamically behave in a way that is undesirable in high performance driving situations.
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