I use Vector Magic quite a lot and have done for quite a while. It is good as auto-tracing goes BUT, it's not nearly as good as a good manual trace. If you zoom in on a trace done by Vector Magic, Coreldraw or Illustrator, you'll see that what should be nice continuos curves, aren't. There will be deviations etc. If you're using the auto-trace to produce cutting lines any imperfections will be visible in the final product. Sometimes you might have to look closely, but they are there.
Here's a good video on manual digitizing in Coreldraw
John[flash=425,350:3g98nna5]
http://www.youtube.com/v/1PyRu_hSUW8[/flash:3g98nna5]
So why's it good for embroidery?
First of all Jenny, you have to understand that an embroidery pattern is made up of lots of objects - a circle is an object, so is a square and all the other shapes. Each object is assigned a type of stitch and colour. This is a simplistic explanation but when you understand the concept of object (vectors instead of bitmaps), you'll get it
Embroidery objects don't need the same degree of accuracy as say, vinyl cutlines because you will never produce embroidery with that much accuracy.
Hope that helps.
The online Vector Magic is good to try it out but the desktop version is far better and quicker.