A tracing contest is when you give people a picture, and they have to trace it into their own character/fan character.
The best trace wins.
Tracing is when you, well, trace over a picture then add your own details.
A good trace is one that you keep to yourself and your friends, as a little "hehe look what I did to Amy", fully credit and make sure it is alright and the creator will not mind.
A bad trace is one that you share with anyone and everyone uploading it to every site you know regardless of their rules concerning such a thing, do not credit; claim it is your own and didn't make sure or didn't care if the creator was alright with it.
Don't be a bad trace.