Australia's got two houses, the lower house is the House of Representatives and the upper house/house of review is the Senate. It all functions in roughly the same way as other bicameral (two house) parliamentary systems.
Preferential (instant runoff) voting for the House of Reps ensures that the least offensive candidate to most people in a particular geographic area is elected. If your preferred candidate isn't elected, your vote goes to your next preferred, and so on until someone wins a clear majority.
The proportional preferential voting used for the Senate ensures that candidates are roughly elected in proportion to the votes they receive across the entire state they represent. Roughly speaking, a party with 50% of the votes should get 50% of the seats, but a party with 5% of the votes should still get 5% of the seats. Political turbulence is smoothed out by only electing half the Senate at each election (the other half stays on until the next one).
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