a) A TSL exception enables you to detect and respond to a specific error code returned during test execution.
b) Suppose you are running a batch test on an unstable version of your application. If your application crashes, you want WinRunner to recover test execution. A TSL exception can instruct WinRunner to recover test execution by exiting the current test, restarting the application, and continuing with the next test in the batch.
c) The handler function is responsible for recovering test execution. When WinRunner detects a specific error code, it calls the handler function. You implement this function to respond to the unexpected error in the way that meets your specific testing needs.
d) Once you have defined the exception, WinRunner activates handling and adds the exception to the list of default TSL exceptions in the Exceptions dialog box. Default TSL exceptions are defined by the XR_EXCP_TSL configuration parameter in the wrun.ini configuration file.

[Source: JAGAN MOHAN "Interview questions bible"]

Answers and Comments