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Definition of Time Tracking:

Time tracking is a daily process of recording the daily working hours of the employees and providing accurate compensation for their time and efforts. This is usually done meticulously for contract employees and freelancers, who are paid on an hourly basis. 

Earlier done manually, employees punch their timestamps to clock their in and out time. Nowadays, you have time-tracking software that will accurately track the login and logout timings of the employees, the time they spent on a particular project, time spent with a client and so on. This helps in accurately providing the compensation, identifying discrepancies, and plan ahead for budgeting and so on.