The TCS control unit needs to know how the engine is being used in order to correct any mistakes being made, it corrects these mistakes - like wheel spin buy cutting power to engine by restricting the air flow (the ecm will partially close the throttle body for a few milliseconds) this cuts power instantainiously, drops the revs and prevents wheel spin.
However it relies on several sensors like the MAF (mass air flow sensor) to keep the engine going and feed the control unit the correct info. If the signals are out of there tolerences then it can cause problems i.e if you were to boot it and the traction control was to kick in (but your MAF was taking a very weak signal) the engine may stall because the throttle body had closed too far. this is why it throws the light on and completly shuts down the traction control - better to loose one system completly than to have several faulty ones.
Realisticly if the MAF sensor is faulty then your performance should also be lagging.
Just some info - hope you find it useful