In simple terms trace decay in regards to psychology is forgetting. Trace decay is the theory that memory leaves some type of trace, a physical or chemical change, within the brain that begins to decay over time.
It is theorized that trace decay begins after only 15-30 seconds. Short term memory can be retained beyond this point by rehearsing or effectively memorizing the information or event. The rate of decay is theoretically affected by the time delay between the presentation of the information and the recalling of the information. The longer the time, the more likely trace decay occurs and forgetting happens.
The theory for trace decay was developed between 1958 and 1959 in the United States and the United Kingdom. The technique developed to test the theory was called the Brown-Peterson task. People being tested were asked to count backward in threes and fours from a random number in order to prevent memorization of the information presented. Then they were asked to recall the originally presented information.
Trace decay is an almost impossible theory to test since there are few ways to recreate scenarios that would test it outside of real life. Decay theory also fails to explain why people can recall in great detail things that happened quite some time ago.