http://support.microsoft.com/kb/308419Traverse Folder/Execute File
For folders: The Traverse Folder permission applies only to folders. This permission allows or denies the user from moving through folders to reach other files or folders, even if the user has no permissions for the traversed folders. Traverse Folder takes effect only when the group or user is not granted the Bypass Traverse Checking user right. The Bypass Traverse Checking user right checks user rights in the Group Policy snap-in. By default, the Everyone group is given the Bypass Traverse Checking user right.
For files: The Execute File permission allows or denies access to program files that are running.
If you set the Traverse Folder permission on a folder, the Execute File permission is not automatically set on all files in that folder.