The American Flyer 761 semaphores are a simple way to add realistic automation to your layout. They can be operated either automatically by using #697 track trips, or manually using control buttons.

WIRING:

Red wire controls the STOP aspect using a momentary contact (button or track trip).
Green wire controls the GO aspect (button or track trip).
Yellow wire connects the LIGHT to the 15VAC post and completes the electrical circuit to throw the solenoid when the button is pushed or the track trip is activated.
Black wire is the BASE.
The White wire controls the Isolated section for automatic control by making or breaking the electrical circuit in a short isolated section of track. (the non-BASE rail only). The power comes from the Base rail so don't isolate the wrong rail section or smoke happens.
If you use the 697 track trips, the Red wire goes to the trip used to stop the train, usually placed immediately after the signal. The green wire goes to the trip to start the train in the stopping section where the WHITE wire is connected.
 
Basically, the semaphore provides a bit of automation by permitting two trains to run on a single loop of track. The placement of the track trips set up the timing. When a train passes the signal, the track trip with the red wire connected completes a circuit that drops the semaphore and the isolated rail section is dead. The usual length is about 2-3 feet. Steam locos tend to coast and will overrun the signal if it is too short. When the following train enters the isolated section, it stops until the first train hits the track trip connected to the Green wire. The track trip completes the circuit and raises the blade to GREEN, also completing the circuit that powers the isolated rail through the White wire. Now the second train passes the signal and the cycle repeats itself.
 
If you use the control button, the cycle becomes manual and the operator controls the semaphore. Don't get distracted when you have a train stopped at the signal !