The first number refers to the day of the week the train departs its origin. 1 = Sunday, 2 = Monday, 7 = Saturday.

The second digit (letter) is the origin and the third digit (letter) is the destination, viz:

A = Adelaide
B = Brisbane
C = Coolamon/Cootamundra
D = Darwin or Dimboola
E = Cobar
G = Goobang Jcn (Parkes)
H = Broken Hill
J = Junee
K = Kalgoorlie
L = Alice Springs
M = Melbourne
N = Newcastle
P = Perth
Q = Medway Quarry
R = Grafton
S = Sydney
T = Tennant Creek or Taree (was previously McIntyre Loop)
U = Narrabri/Moree
V = Moss Vale/Berrima
W = Wollongong/Pt Kembla
X = Pt Augusta
Y = Whyalla

The fourth digit was originally the sequential order of departure from the origin each day on that line, but may now indicate an operator. For example, the first train from Sydney to Melbourne on a Monday would be 2SM1. The second train from Sydney to Melbourne would be 2SM2. The first train from Sydney to Brisbane would be 2SB1.

However the fourth digit now refers to the type of train or the operator, and varies between corridors.

Passenger trains use the suffix 8 regardless of their order of departure, e.g. the Overland is AM8/MA8. The Indian Pacific is numbered as separate trains from Sydney to Adelaide and then from Adelaide to Perth, i.e. SA8/AP8 and PA8/AS8.

Examples
4AS6 - ARG intermodal from Adelaide to Sydney departing Adelaide on Wednesday.
1BM7 - QR National intermodal from Brisbane to Melbourne departing Brisbane on Sunday.
1AD8 - The Ghan from Adelaide to Darwin departing Adelaide on Sunday.
6NY2 - Pacific National steel from Newcastle to Whyalla departing Newcastle on Friday.

Notes:
1) There is some duplication in locations, e.g. Darwin and Dimboola. If a train was ever to run from Dimboola to Darwin, it would change numbers in Adelaide.
2) Darwin was to be V but the terrminal in Darwin is located in the suburb of Berrimah, which could get confused with Berrima (which is also V).