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all versions of illustrator prior to CS2 will need to rely on a program called Adobe Streamline for changing raster images to vector. the live trace feature replaced the program when they incorporated it into CS2. search around, you may still be able to find a copy of it.
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"Those are my principles, and if you don't like them... well, I have others." Groucho Marx
The Auto Trace function comes with Illy 9 & 10 and is hidden in the Tool palette (correct me if I'm wrong, not sure anymore since I use CS2... use the help function to find somthing ). It was originally designed to trace the outline of a simple raster image shape. Click on the edge of the shape and Illy follows the edge back to the origin point, forming a closed path. Unlike Live Trace in CS2, that outlines all of the shapes in an image, the Auto Trace Tool (called Streamline before like Kenn said) in Illy selects only one shape at a time. This means you need to select all the shapes in your image if you want to completely trace it
The Auto Trace function comes with Illy 9 & 10 and is hidden in the Tool palette (correct me if I'm wrong, not sure anymore since I use CS2... use the help function to find somthing ). It was originally designed to trace the outline of a simple raster image shape. Click on the edge of the shape and Illy follows the edge back to the origin point, forming a closed path. Unlike Live Trace in CS2, that outlines all of the shapes in an image, the Auto Trace Tool (called Streamline before like Kenn said) in Illy selects only one shape at a time. This means you need to select all the shapes in your image if you want to completely trace it
oh, yeah! i forgot about the auto trace tool. now i remember that it wasn't that good and i always ended up using streamline instead.
boy, i was glad when live trace was introduced. it's really a cool feature. i use it all the time.
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"Those are my principles, and if you don't like them... well, I have others." Groucho Marx
I use Illustrator CS, and have found the Auto Trace function to be an absolute waste of time and an exercise in frustration. However, I have recently stumbled on a tutorial site that has a link to a free program called Inkscape, which sounds promising. How to Make Vector Grunge | BittBox
Bear in mind I have not had a chance to try this yet, but you may find it helpful.
auto trace on illustrator 10 
). It was originally designed to trace the outline of a simple raster image shape. Click on the edge of the shape and Illy follows the edge back to the origin point, forming a closed path. Unlike Live Trace in CS2, that outlines all of the shapes in an image, the Auto Trace Tool (called Streamline before like Kenn said) in Illy selects only one shape at a time. This means you need to select all the shapes in your image if you want to completely trace it 
