Three rail track, while not prototypical like two rail track, offers many benefits for the operator:
*Easy operation of signals, whistles, etc.
*Non-derailing switches
*Automatic directional control
*No-fuss reversing loops
Let's start with easy automatic operation of signals, whistle/horn stations, etc. The trick here are insulated rail sections. These are quick and easy to make, or you can buy them already made.
All you need to make an insulated section are a track section, insulators salvaged from old rusted track (or you can make them from pieces of card stock) and two fiber pins. The only tools needed are a screwdriver and a small block of wood.
Just pry up the tabs holding one of the outside rails, remove the rail, insert the old insulators and put the rail back in place. Put the block of wood in the small of the back of the tie (to avoid deforming the tie in this step) and push the tabs back down using your screwdriver. Be careful that you don't puncture the insulators during this step,
Insert fiber pins into the two ends of the newly insulated rail and attach a lock-on to the same rail.
Your train's wheels are attached to each other by a metal axel. When the train wheels touch the insulated section, the axel will transfer power to the insulated rail thereby activating any device attached to the lock-on. It will stay activated as long as train wheels are on this section.
Lots more magic to be had if you take advantage of the non-derailing function of Lionel's automatic switches,
You already know, I'm guessing, that these switches will automatically switch when a train enters it and it is set for the opposite direction, thereby avoiding derailments. This same attribute of the switches can allow you to automatically have them perform other functions.
If you have passing sidings, you can avoid rear end collisions using this non-derailing feature.
All you need are two automatic switches and two different colored wires. Connect the wires to the terminals on the switches as shown below. The ground terminals are not used, switch controllers are not needed.
Connected in this way, when your train leaves one of the sidings the trailing switch will automatically change direction to that siding. No need to remember to switch direction with a controller - no more rear-enders
Using this same trick with two connected loops, such as those shown below, your train will automatically switch to the alternate connected loop every time. Makes a small layout more interesting.
No-short and automatic reversing loops.
Reversing loops such as those show below would cause a dead short with two rail track. One would need to control the current with "blocks" and toggle switches to avoid shorts.
Not so with three rail track.
Connect your switches to your controllers in the usual way and, using your controllers, you can send your trains in the reverse direction on a whim. OR, don't use your controllers at all! The non-derailing function will automatically send your train in the reverse direction every time it travels through this section.
If you found this post informative, you may also enjoy reading the following, somewhat related, earlier posts:
I've found 5/8" squares of 2 liter Coke bottles make excellent insulators.