What does "traffic in position..." phrase mean?
The phraseology in the question is incorrect.

If the planes on on the same runway without ASDE-X, the aircraft departing will be given:


  DELTA 2-7, RUNWAY 1, LINE UP AND WAIT, BOEING 7-2 6-MILE FINAL


The arriving aircraft will not be given a landing clearance until the holding aircraft has departed, but it will be told:


  AMERICAN 4-2-9, RUNWAY 1, CONTINUE, TRAFFIC HOLDING IN POSITION


If the planes are on different runways, it would be:


  DELTA 2-7, RUNWAY 1, LINE UP AND WAIT, TRAFFIC LANDING RUNWAY 19


and the other 


  AMERICAN 4-2-9, RUNWAY 1-9, CLEARED TO LAND, TRAFFIC HOLDING IN POSTION RUNWAY 1


Source: Air Traffic Conrollers Handbook, Section 3−9−4. LINE UP AND WAIT (LUAW)