Typical American signals near Zephyrhills, Florida

In both real life and OpenTTD, signals are crucial for safe operations. They divide sections of track into blocks (spaces between signals). Usually, only one train is allowed in a block at any given time. This ensures that trains are kept at safe distances from each other and do not collide.

In OpenTTD, signals are placed from the signal toolbar, accessible from the Railroad Construction Toolbar. Below is a diagram of how it works.

Block signals are the most basic type of signal, and also the only type of signal in Transport Tycoon Deluxe (the game OpenTTD is based on). They show green if the block ahead is clear, and red if it is occupied. Block signals are best used as regular signals on double-track lines.

The other 3 block signal types are known as pre signals, and are intended for junctions leading to and from multi-track stations. They are as follows:

• Exit signal: Behaves like a normal block signal, but determines what other pre signals ahead of it show.
  
• Entry signal: Shows green as long as the block ahead is clear and has at least one green pre signal. If any of these conditions are not met, it shows red.
  
• Combo Signal: As the name implies, this is both an entry and an exit signal in one. If the block ahead is occupied or has no green pre signals, it will show red. Good for making junctions more efficient.

As previously mentioned, pre signals are best used for junctions at large stations, as above. They can also be used for smaller two-track terminus stations, as below.

Pre signals are good at making stations more efficient, but have one major drawback. As block signals, they can only allow one train into a block at any given time, which can cause problems. This is where path signals come into play. They work by reserving paths, highlighted in black, for trains passing through blocks. As a result, multiple trains can coexist in a path signal’s block as long as their paths do not conflict. If a train’s path does conflict with another already in the block, it will wait at the path signal until a path is found. There are two types of path signals:

• Path signal: Trains can pass regular path signals from the back, but will avoid doing so unless necessary.
  
• One-way Path signal: Trains cannot pass one-way path signals from the back, no matter what.

Path signals are probably the most useful signals in the entire game. They have many uses, which are as follows:
Path signals can be used at large station junctions like pre signals, but have the added advantage of allowing multiple trains to enter and exit the station at once.

They can also be used at terminus stations, large...

...or small.

On single-track lines, one-way path signals can be used to create passing sidings.

On busier double-track lines, they can be used to create overtaking sidings, where faster trains overtake slower ones.

Path signals activate any railroad crossings in a train’s path, so they should be placed a certain distance ahead of all crossings to give vehicles extra warning time.

Path signals can also be used where lines join or split, although this may not be necessary depending on how short or long your blocks are. Path signals can even be used as regular block signals. Some players’ rail systems use path signals exclusively.

Several NewGRFs (New Graphical Resource Files, equivalent to mods) add custom signal sprites. These range from standalone NewGRFs to complete track sets.
In the Settings, which affect gameplay (not to be confused with the Options, which do not affect gameplay), there are several parameters relating to signals. To see all settings, set the category to Expert. Some of the more useful settings are as follows:

• Show signals: This affects what side of the tracks signals are displayed on. Set to On the driving side by default. You can also set it to On the right or On the left if your game is set in a country where the driving sides of trains and road vehicles are different (for example, France, Switzerland, Sweden, China, and the Chicago and North Western Railway in the U.S)
  
• Show path reservations for tracks: Self explanatory. Set to On by default.
  
• Automatically build semaphores before: Also self-explanatory. Set to 1950 by default.
  
• When dragging, keep fixed distance between signals: As signals cannot be placed on bridges or in tunnels, signals are placed at the last tile before any tunnel or bridge when dragging by default. When this setting is set to On, signals will be placed at the set spacing no matter what.
  
• Automatically remove signals during track construction: Set to Off by default. When building a line joining or diverging from another, any signals on the tile where the lines join/split will be removed when set to On. Be warned that this may cause an accident if done near moving trains.