To trace your bitmap, select the bitmap you want to convert. Select Modify> Trace Bitmap.
When the above dialog box appears adjust the settings:
Colour Treshold - the amount each pixel will vary from the pixel next to it before is is viewed as another colour. The larger the number the lower the number of vectors created.
Minimum Area - entering values between 1 and 1000 will set the minimum size a vector shape can be created by the trace.
Curve Fit - determines how closely the traced shapes follow the original bitmap colours.
Corner Treshold - the amount a curve can bend before it's turned into a corner.
Click OK and examine the outcome. This is a tricky method and involves lots of experimentation and the final outcome will be what you are most happy with.