Leading determines how the text is spaced between two vertical lines. To display legible text you have to make sure the distance from the descenders and the ascenders has appropriate spacing to make them legible. Leading is measured from the baseline of each line of text. Leading should be 20 percent greater than the font size that you are using, in some cases different styles have to have different distances.
Kerning adjusts space, but of the distance between two letters. If the kerning is too close, words are indecipherable, if they are set too far apart, they become broken and less visibly attractive. Kerning is also vital in differentiating where one word ends and another starts.
Tracking is often confused with kerning. Tracking involves adjusting the spacing throughout the whole word rather than letter by letter. You have to be careful when altering tracking as it can lead to difficulty in reading.