The wait list system for Indian train tickets is simply a case of supply and demand - there's so many people wanting to travel and only so many seats to go around. So there are three 'booking statuses' which may be specified when you book a train ticket:
- Reserved / confirmed: The booking is confirmed and a seat has been set aside for you. Note that the specific seat may NOT be specified on your ticket even if your ticket is confirmed. This is because the final seating charts are sometimes decided an hour or two before the train departure. More on how to check the final status of your ticket below.
- RAC (reservation against cancellation): An RAC ticket is a status just above a wait listed ticket, and means you get converted to a confirmed seat in case of a no show by someone else. In most cases, RAC tickets do get converted to confirmed and you can often at least get on the train with an RAC ticket.
- Waitlisted: You cannot get on the train unless the final chart before departure confirms that your seat has been reserved. It's a first-in, first-out queue of people waiting to get a seat.
The reason for this system is that due to demand, many people book tickets months in advance. Due to this - planning months in advance - many people's travel plans do often change and some people cancel their tickets. Hence, the waitlist system allows you to book a ticket and then wait in queue to be next in line for a reserved seat.
Now I mentioned that even with a confirmed ticket, the seat number / coach number might not be mentioned. Regardless of what the ticket says (confirmed / RAC / waitlist), final seating charts are published and put up on notice boards in stations which list the final passenger manifest. You can also check this online (using the Indian Railways PNR status page) or the automated telephone line mentioned on the back of your ticket.
As a rule of thumb, if your waitlist number is in the range of 10-20, depending on how busy in the season it is, there is a high chance of your ticket getting confirmed. Because the final charts are not published until a few hours before departure, you might have to wait till quite late to find out - but if it's in single digits, then it's almost always true that your ticket gets confirmed.
If you really want to be sure, a certain percentage of tickets on every train is set aside for short-notice bookings (called 'Tatkal' tickets) which open I think 48 hours before departure. These tickets cost slightly more than normal tickets but give you the flexibility to make bookings at short notice. If your waitlist number is double digits, it makes sense to keep checking the online system to see how quickly your waitlist number is reducing which will give you an idea of whether you're moving up in queue or not, i.e., a lower numeric waitlist number - and if it doesn't seem to be progressing in the final few days before the journey, then to cancel the original ticket and get a Tatkal ticket instead.