When a passenger books a ticket for travel over the internet or at the reservation counter of the Indian Railways, he/she may come across the notations like RAC or WL. These notations are telling the passenger what is the status of the ticket.
The full form of RAC is Reservation after cancellation. It means a passenger who is holding this particular type of ticket can get on to the train and travel with this ticket. He will be able to get a seat on the train. However he would not be guaranteed a sleeping berth on the train as berths are allotted according to the number of cancellations that take place for that particular train. You are given a number along with your notation of RAC. Example you have RAC 3. It means that you have to wait for 3 people to cancel their tickets before you can get a berth on the train. That is why this notation is called Reservation after cancellation.
The other notation one finds on a booked ticket of the Indian Railways system is WL. The full form of WL is Waiting List or Wait Listed. Here a passenger does not have a confirmed ticket and cannot board the train for travel. The passenger is kept on the list and as and when the cancellations take place, will his name move into the RAC category.
It is very simple to understand. The seats with berths are reserved on a first come first serve basis. Once the seats with berths exhaust then all other requests are under RAC or Reservation after cancellation.