i.p address internet or computer?

No they can not trace to where you live. They can only trace to where your cable/internet company is located. It means they have the ip address that is coming from your modem box. If you have comcast cable for example, they can trace it to the comcast cable company in your town or wherever it is. That's all. Anybody can get your ip address when you send them an email. It's in the area at the top of the email called the "Email Headers" area.

dont worry man, all commerce sites have "WE ARE WATCHING YOU..." message. They are saying that to scare off people who are trying to use other peoples credit card nos. What they mean is they have your ip logged with the transactions. If there was a case of identity theft they can trace you to your home. Its just like the "You are On Camera" signs you see in shops. If you are legit user you have nothing to worry about.