Alien Shores,
A not to in depth discussion on the operation of transponders can be found on this
AvWeb Transponder Basics link
A total of 4096 transponder codes are available under the present arrangement of 0-7, these are decimal numbers that are just converted to binary (ie 0 is converted to 000, 7 is converted to 111) so the pulses that are sent back to the ATC radar antenna at 1090 MHz in 20.3 microsecond blocks contain these transponder code binary pulses and the encoded altitude which is also a binary number encoded into a bunch of 0's and 1's.
