Hi Sabre,
Sometimes the schedule flight number is used, increasingly though a separate alpha-numeric callsign is used for ATC purposes. This is usually totally separate from the flight number and is designed to avoid callsign confusion. Most airlines typically use a mix of flight numbers and alpha-numerics - this is because some countries, such as Egypt and Turkey (except overflights), will not accept alpha-numeric callsigns at all and insist on the ticketed flight numbers being filed.
The callsigns are allocated by the airline itself and are normally fixed to a specific flight number - ie the same alpha-numeric will be used for the same flight number week after week. Typically an airline will work hard to deconflict its own callsigns to guard against confusion amongst their own flights, however there is no system at present to identify potential confusion between the alpha-numeric callsigns of different airlines - this only tends to be identified when confusion actually occurs on frequency and is becoming more and more of a problem.
Hope this helps.
Regards,
Eurotraveller