Tracing paper is used for sketching out new designs, copying old ones for modification, and even as a protective sheet to help keep my bench clean! I also will trace a pattern onto a piece of trace, then adhere the trace to some cardboard (non-corrugated) and cut out the pieces to use as templates for duplicates of the design. You can't imagine how many times doing so has saved hours on a project!
Trace also makes a neat crinkling noise that my new son really loves! ;-)