Track width is the width of the car - measured at the center of the tires.
The minimum track width is determined by the tilt test. A wider car is better at resisting rollover.
The maximum track width is determined by how wide the actual racetrack is.
A narrower car will be more easy to maneuver through a tight autocross course, but it also means more weight will transfer to the outside tires in a turn. Due to tire load sensitivity, this makes the ultimate cornering performance worse.
A wide car will perform better in the skidpad event because of the lower weight transfer. However, a larger car effectively makes the course tighter which is worse for autocross. If you play around with this Desmos calculator, you'll notice that the slalom gets quicker as the car becomes narrower. If you have TTC data at this point, you can calculate how much the tire friction coefficient drops off due to the increased load transfer. My hypothesis is that the benefits of the narrow track width outweigh the downsides.
click on "edit graph on desmos" in the bottom right and play around with the parameters!