Traffic exchange is a service where you can exchange your website traffic with other websites, usually for free.
The main concept of traffic exchange is that you get what you give and so you have to send traffic or visit websites yourself in order to get traffic in return.
There are many websites offering traffic exchange and in return they get webmaster exposure to their advertisements and of course a webmasters database.
A webmaster sign up to the service.
Next step is either place a code on the website ( the code empowers the traffic exchange website, but also display other websites of other webmasters who are members with this service ).
Next step, you are promised to receive traffic based on the amount of websites you visit. OR you will get visitors for visitors who visit the other websites ( everything is tracked so you can know exactly what was sent and where ).