Setting up call tracking on Twilio can help marketers understand the performance of their advertising by attributing calls to specific channels, ads, and campaigns. This can be achieved through dynamic number insertion (DNI), web cookies, or UTM parameters, allowing for multiple ways of attribution. The process involves purchasing a phone number, configuring it with TwiML, and programmatically adding numbers to advertising campaigns and webpages. With call tracking, marketers can focus on channels and ads that are working and re-strategize on those that are not, ultimately improving their return on investment (ROI) from paid advertising.