Depends on the startup. If you have IP that provides a clear advantage, that's more valuable and easier to make successful than say a mobile app idea. Traction has become investors favorite buzz word. It makes sense though because they aren't gamblers. They are looking to fund proof of concept. They want to help a good idea become a successful business.
Traction, if defined as getting interest or sales from customers is extremely important. Lots of people think that they may be able to get investors in just on an in idea. The truth is this almost never happens for 1st time entrepreneurs. On the question of major milestones however, I would not worry about this as much. The important thing is to continue to re-evaluate your assumptions, target audiences, product to market need fit. You will find your milestones keep shifting that that is perfectly fine as long as you are getting traction or on your way to getting traction.
For a startup, external traction is crucial. Traction means that you are creating (hopefully meaningful) moments and activity that are getting noticed from users, media, press, and the tech community. This helps attract new users, more media attention, and possibly investors.
Milestones are equally important to your company. Milestones are simply internal markers on your development timeline that keep you and your team on track.