The Block Signal is used to indicate and control the flow of traffic over rails. For more information on their use, see Signalling.
This is the most basic Signal, both a Block Signal and a Controller Circuit. This signal will form the heart of your Signalling System. It must be placed near a rail in order to form a valid Signal Block. The exact distance it can be from the rail is somewhat hard to define, but it must be within two tiles horizontally, and four tiles vertically. You need not place the signal on both ends in the same configuration relative to the rail, all that matters is that the rail forms a straight line between the two signals. When searching for a rail, it will look below it first, then one tile to either side, and then finally two tiles to either side. If two rails are at the same distance from the signal, the exact rail picked will vary on the implementation of the search algorithm and will not be defined here. Best to avoid such configurations as there is no guarantee they will remain valid between updates.
Side-View representation of proper signal block positions (using _ as rail and + as possible placement):
+ + + +
+ + + + + + + + + + + + + _ + +