Traffic analysis is based on the fact that every packet of data sent from your computer includes a header containing information about source, destination, size, timing, and other items. If you take a look at a packet header you can at the very least see who sent the the data packet. That's what traffic analysis in its simplest form is about: intercepting data packets and looking at their headers.
Tor tries to keep your packets private by distributing your transactions over several places on the Internet, so there is no direct connection to your destination. As Tor's Web site puts it: "The idea is similar to using a twisty, hard-to-follow route in order to throw off somebody who is tailing you -- and then periodically erasing your footprints."
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