Tracking is when children are put in a "track" early in elementary school. For example, a school may have three 1st grade classes (low, middle & high). The children basically stayed in these tracks all the way through school. The argument against tracking is that it locked kids into a position and supposedly the kids in the low class end up with some type of negative self-image. (Sidebar: I don't think it helps to have the slower kids in the same class as the highly gifted. I remember one mother in my daughter's pre-K class telling me that her son came home crying one day because he didn't think he would ever read as well as my daughter.)
Ability grouping puts children with like abilities together. In theory, the groups are fluid and children move between them as achievement and ability allow. Ability grouping can be done within a class (many literacy programs are designed to use ability grouping within a classroom) or among several classes or even between grades. Also, the ability groups are different for each subject so that a child that excels at math and struggles with reading may be in a high ability math group but a lower ability reading group. In theory this allows children to learn at their optimum rate.
Gifted clustering is where a minimum number of gifted students are put in a class together (most commonly 3-8 gifted kids in a class). This allows them to have peers and supposedly makes it easier for a teacher to differentiate.
