The 2026-07-28 MCP spec standardizes W3C Trace Context propagation in _meta — traceparent, tracestate, and baggage keys that let a trace starting in a host application flow through MCP clients, servers, and downstream services. This talk covers practical implementation: how to propagate trace context from the host through tool calls, how MCP servers create child spans for tool execution, how to correlate traces across multiple MCP servers called in sequence, how baggage can carry application-level context like conversation IDs or user metadata, and what observability platforms show when traces span host-to-MCP-to-downstream. We share findings from instrumenting a self-hosted MCP registry with OpenTelemetry, including which clients correctly propagate traces today and which don't.