Every time someone views a page on your website, they leave a trace of that activity in the logs of the server your website lives on. Most likely, that server is at a web hosting company, and they provide you with a statistics page so you can see how many people are seeing what pages.
But there’s much, much more to traffic analysis than just that. By adding a small amount of code to each of your webpages, and using a traffic analysis tool, you can discover how your visitors are distributed geographically, how many are repeat visitors, what search terms they used on Google or Yahoo to find your site, what paths they took through your site, what pages are most likely to lead to visitors becoming customers, and so on.