A trailing limit order is used to set a price to sell your position if the price goes below some threshold below the maximum price of the stock since the order was placed.
Say you wanted to cut your losses if the stock drops 10% from its highest price, and the stock is currently at $100. Then if the stock drops to $90 a sell order would be placed. If, however, the stock rises to $110, then the limit order will be adjusted to 10% below that price, or $99.
You can also set an absolute threshold as well, say if you want to sell if the stock gets more than $10 below its highest price.
It's a way to limit your losses that adjusts if the stock price goes up significantly.