Traceability Matrix is one of the very very important document to trace the requirements to a testcase document. In simple terms when testers prepare the test case document, they will map each test case to a requirement. Usually one or multiple testcases will be mapped to one requirement.
This traceability matrix is helpful to verify incase of any failed testcases or failed projects due to wrong functionality. But now-a-days most of the business analysts are not using traditional traceability matrix document as they mostly using the tools such as ALM to trace directly the test cases to requirements. This is more secure and can be easily editable.
In earlier days an excel sheet is used for this purpose.