Well when you use a single proxy server you're relying on that single server to mask your IP, however, if you use proxy chaining you're using multiple proxies to mask your identity.
Exactly.

In order to trace the connection, you have to have logs intact on each proxy in the chain. The chances of this happening deminish significantly each time you add a proxy server to the chain. So if you chain 5 proxys together, you are much more likely to hide the connection source than you would with 1 or 2.

As reboo+ has pointed out, a single proxy is much more likely to have log files that would contain all info necessary to identify you.

Note that I am not encouraging you to go out and employ this technique, I'm simply educating you on the basic concept of proxy chaining.