A traceability matrix is a table used in project management to track business requirements vs product features, or test cases vs product requirements or features. It helps ensure that all original business requirements are met and that 100% of the product's features are tested. The matrix can be used for tracking revisions of requirements over time, determining what should be included in testing, and making sure 100% test coverage is achieved. There are three types of traceability matrices: forward (maps requirements to test cases), backwards (maps test cases to requirements), and bi-directional (maps both). To create a traceability matrix, one needs to note down all product requirements, create a table with columns for requirement ID, type, description, test cases, and extra information, add rows for each requirement, and save it as a living document.