The music format started on the Commodore Amiga in 1987, as Karsten Obarski had grown tired of coding his music in assembly machine code and wrote the sequencer software The Ultimate SoundTracker to simplify the process. The program created files in the MOD file format, giving the type one of it's most common names, mod music.
The Ultimate SoundTracker was not commercially successful, but spawned a series of similar sequencers, most notably ProTracker and NoiseTracker, and the MOD format quickly became one of the most popular music formats across the home computer platforms.
Among the reasons for the format's success was it's comparably low CPU overhead (on the Amiga it was possible to process all the music in the video memory, skipping the CPU altogether), small file sizes and relatively good sound quality, which mostly depended on the amount of storage that could be used for the music, rather than the capabilities of the format itself - the Amiga had the capability to play music in near CD quality, up to 56khz 14bit as compared to the 44.1khz 16bit CD format, and samples at that quality could be used, but used a lot of space that could be needed for other game assets. Sound quality would also be very consistent on all sound cards with the ability to play digitized sounds, partly solving the issue with several competing (and widely different) sound card standards on the PC in the early 90's, where a MIDI song written for the Roland MT-32 would sound entirely different on the Adlib or one of the many competing cards at the time. The music could also be easily programmed to have multiple self-contained loops, which then could be triggered by the game as needed, creating dynamic soundtracks.
In it's most basic form, a module file consists of patterns (vertically scrolling spreadsheets that generally had 64 steps that could easily represent the simple 4/4 time signature, the most common in Western music), samples and a pattern order list, which defined the order patterns should be played, with the possibility to repeat or loop patterns. Early mod music was limited to 4 sound channels, meaning only 4 sounds could be played at a time (based on the Amiga sound chip's limit of 4 concurrent sounds, two for the left speaker, and two for the right), each channel was represented by a separate column in the pattern, and every step in the pattern was a new row.
The most popular formats were MOD and MED on the Amiga (made in SoundTracker/ProTracker/NoiseTracker and OctaMED respectively), and S3M, IT and XM on the PC (ScreamTracker 3, Impulse Tracker and FastTracker II). Tracker music also existed on the Atari ST, ZX Spectrum and most other home computers in the late 80's and 90's, as well as some video game consoles, most notably both the NES and Game Boy got their own (unlicensed) Tracker Software which were used to compose some of the music for the platform - though that music would fall within the chiptunes realm, as they only utilized the internal synthesizers of the systems, rather than digitized samples.
While many modules are played like normal songs, with static lengths, an beginning and end, that's not a necessity in the format, using loop points a module can be made infinite, or feature more than one song per file by having several self-contained loops, called subsongs or iterations, examples of the latter appear in Deus Ex, which generally have 3-5 songs per file (the level music, conversation music, battle music and sometimes specific death and departure songs), and in 7th Legion, which had more than 10 variations on some songs, played when specific events occurred in the game.
Many Amiga games stored all their sound effects as subsongs in one file, while infinitely looped songs where often used for Amiga loaders or at loading screens.
Tracker music is still relatively common today, even though most AAA games use entirely pre-recorded music. For formats and distribution models where space is still a premium - such as on download services like XBLA, PSN and DSIWare/WiiWare, Smartphone marketplaces etc., as well as on cartridge based platforms like the Vita, DS and 3DS the format is still used in the majority of the games. The Unreal Engine 1 used UMX files, which were renamed XM or IT files, but since the mid-2000's two OGG compressed standards have gained ground, allowing for much higher quality music at very small sizes - such as OXM and MO3, used by the Fmod and BASS audio libraries respectively, these files are normal FastTracker or Impulse Tracker files where the individual instrument samples are compressed with OGG Vorbis before being put into the game, and can often compress a 10-15MB song to less than 1MB. FMOD specifically is one of the most commonly used audio libraries across all platforms.
Many media players support playback of the most common tracker music formats, but only a handful fully support loop points and subsongs, and some - most notably Winamp - still have occasional problems with some of the effects that could be used in the music, like pitch gliding, fine tuning, loop points and stereo pan effects, which may cause the music to be played out of tune, or crash the player entirely.
While there are numerous methods of creating chip music - originally they were often programmed directly in assembly or the platform's coding language of choice, not using tracker software anywhere in the loop - a large subset of tracker music is called chiptunes. Most of it is not written strictly for, or within the limitations of, a specific sound chip, but emulate the sound of NES style music by using short waveform samples as instruments. While there are trackers that are specialized in operating with specific sound chips, such as that of the NES, the Adlib sound card or the C64's SID chip, the vast majority of all chiptunes are and were written on Amiga's and PC's, using samples rather than hardware synthesizer oscillators. Even on the Amiga and PC there are some benefits to chiptunes, as simple waveform samples don't need to be more than a few bytes, thus the hard drive or memory used by the music is minimal, an efficiently made chiptune may not be more than a couple of hundred bytes in total. The small file sizes were also beneficial in the early days of the Internet and BBS, were transferring large files was time consuming and prone to errors.
Notable video game composers using trackers
There are of course plenty of musicians using tracker software, especially in the indie scene. Some notable musicians that wrote music in tracker formats, or still do are: