Multi-track is the original instruments/performances recorded in the studio to a multi-track analog tape machine, stand-alone digital recorder or a computer hard disk system. The resulting recording is often referred to as the "original session tapes".
Typical multi-track recorders can record anywhere from 4 to 32 tracks of audio, with many more tracks possible depending on hardware and budget. For instance, it's possible to chain 2 or more 8 track digital recorders (an Alesis ADAT, for example) together to get 16, 24, 32 or more tracks for recording. Computer hard disk recording systems (ProTools, Logic, Cubase, etc) often offer many more than 32 tracks, but this is limited to the computers power and resources. The more CPU power you have and the faster your hard disk sub-system is, the more tracks you can record and play back simultaneously.
In the studio, when you record, say, a drum track for a song you would typically set up 5 (more or less) microphones and point them at the snare, kick drum, hi-hats and a couple of overheads (one on the left, one on the right) and send the signal to 5 inputs of a multi-track recorder. If you're recording to a 16 track system, this leaves 11 available tracks for layering (recording) the bass, lead guitar, rhythm guitar, vocals, saxophone, backing vocals, etc. The resulting finished "multi-track" recording is then played back through a multi-channel mixer, with each input matching an output of the recorder. This is then "mixed down" to a...
2 Track is the sum of all the recorded instruments/performances, mixed down to a stereo, left/right field and recorded to an analog tape machine, stand-alone digital recorder or computer hard disk system. The resulting recording is often referred to as the "original master tapes".
The 2 track master recording can then be further edited, manipulated or enhanced, either by passing the signal through out-board equalizers, reverbs, compressors, etc or by using the corresponding "effects plug-ins" in a computer-based 2 track editor such as WaveLab or SoundForge, or both. The resulting "mastered" recording is often called the "final master". This is the finished product that is then sent to the replicators for duplication and distribution.
Whew, that's a lot easier to explain when speaking than it is in writing, heh