A ring signature makes use of your @account keys and a number of public keys (also known as outputs) pulled from the @blockchain using a triangular distribution method. Over the course of time, past outputs could be used multiple times to form possible signer participants. In a "ring" of possible signers, all ring members are equal and valid. There is no way an outside observer can tell which of the possible signers in a signature group belongs to your @account. So, ring signatures ensure that transaction outputs are untraceable. Moreover, there are no @fungibility issues with Monero given that every transaction output has plausible deniability (e.g. the network can not tell which outputs are spent or unspent).