How Defects are tracked across Iteration, Timeline? How defect number is assigned across Time Line / Iteration? Can we carry same defect number across iteration?

The time line of a project area is the time that you want to run one project or a group of projects. It is divided into smaller pieces called iterations. The iterations should reflect your development rhythm, if you do agile development you will have short iterations around 4 weeks, for traditional development you will have larger iterations, maybe 3 months. The iterations will have a sequence on your timeline.
If you have multiple projects in your project area, that follow different development rhythms, e.g. one agile and one traditional, you can consider setting up different timelines in order to reflect this with different set of iterations on each time line.
In the end, the Iteration is set as an attribute on the work item that you submit. So in the end a work item can only be assigned to one work item at a time with the "Planned For" Attribute. If you want to track it in other projects, think of using links, create child work items or related work items.

hope that helps,

Henning