Torque is the twisting force that engines produce. It is the torque force produced by the engine that moves the car. The lower the gearing the greater the force transferred to the wheels and maximum torque is sent to the wheels in the lowest gear.
Traction is the name for maximum amount of the force which a tire can apply on the ground.
Here is a simple demonstration which shows the importance of traction on a vehicle's performance.
There are two types of Wheel slip used in 4wds: Static and Dynamic. In Static Wheel Slip the tire and road do not slip relative to each other. The static wheel slip provides better traction. On the other hand with Dynamic wheel slip there is a relative slipping between the tire and the road which gives a lower traction on road.
Wheel slip can be avoided in well designed 4Wd vehicles.