Rail just goes to the main cities and usually there is only one train per day so it certainly isn't as handy as the McCafferty's/Greyhound bus that can have up to eight departures per day.
There is a line running up the east coast as far as Cairns plus trains from Melbourne and Sydney to Adelaide with connecting trains to Darwin and Perth.
Unfortunately there is no national rail pass as different train companies operate in different states. Countrylink and QR have a pass that works in NSW and Queensland and Great Southern Railway have a very good value pass that covers travel from Melbourne and Sydney to Adelaide and onwards to Darwin and Perth. However the Great Southern Railways rail pass doesn't let you travel north from Sydney.
Another option is the Rex Backpacker Pass. For $500 you get one month unlimited flights on Rex Airlines. The catch is that Rex only flies in southeast Australia and the most nothern destination that Rex goes to is Byron Bay. It can be good value when combined with another bus or rail pass though.
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