Let's see if I can offer some help. There are two separate traction systems available on the C5, Traction Control and Active Handling.
Traction control is a basic system that uses the ABS sensors to detect rear wheel spin and retards the throttle to help prevent loss of control. The stock C5 system allows for a bit of wheel spin before kicking in which means you can have some fun with it before it cuts you off.
Active handling was an option that was introduced in '98 and was standard on the Z06 model. This is an advanced traction system that uses yaw sensors, throttle sensors and the ABS sensors and steering sensors to maintain control of the car. If it is detected that the driver is loosing control the system will reduce throttle and/or also has control over each of the four brakes individually to help bring the car back in line.
Competition Mode is only available on cars with Active Handling. Holding the traction system button down for 5 seconds will change the mode to Competition Mode and this will be shown on the DIC when activated. In this mode the system only makes correction by applying individual braking to correct oversteer/understeer condtitions but will not retard throttle at all. This is the desired mode for track use where you want to be able to get out of the corners with power and not worry about the car cuttting throttle yet still have a safety net to catch you before you spin into a wall.
The Chevy website had a great flash movie describing how the Active Handling system worked wtih different situations. Not sure it's still available though with the C6 out.
Hope this answers some questions.
Leon
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