Originally, the TER existed. It was a rank. It ranked you against everyone else doing the HSC.
Now, we have the UAI. It, too, is a ranking. You are ranked against everyone in the state who completed Year 10 with you. This includes everyone doing the HSC as well as those students who chose not to go on to Year 12 (their ranks are estimated).
As the UAI is a rank, it is better for students to achieve an average mark and beat a large portion of the state than to achieve an above average mark and beat a small portion of the state. The student's ranking in the first scenario would be higher.
You are competing against the other students in the state.
Case A:
You are doing a course that is done by smart students who tend to go well in most of the courses they take. It is harder for you to obtain a high ranking.
Case B:
You are doing a course that is done by not so smart students who tend to not go so well in most of the courses they take. It is easier for you to obtain a high ranking.
The scaling process is designed to compensate for this imbalance between courses so that students are neither advantaged nor disadvantaged by the courses they choose.
The marks of every course are standardised to a mean of 25 and a standard deviation of 12 (on a 1-unit basis) so that rankings can be compared between courses. However, the UAI is a rank and must be calculated from student results. You cannot 'add' or combine these standardised rankings, because that would advantage students who did case B courses and disadvantage students who did case A courses.
To overcome this, the course marks are scaled, and these differences are eliminated.
All case A courses will be scaled up and all case B courses will be scaled down.
Once this scaling has occurred, the marks for all courses will be in the same 'currency' and it is possible to compare marks across courses. A 'scaled aggregate' is calculated for each student by adding the marks of their best 8 units to the marks of their best 2 units of english. These scaled aggregates are ordered from highest to lowest, and all students are given an appropriate UAI ranking.
To use an analogy - when the TER was calculated, the top 0.025% of students in this list of scaled aggregates would be given a TER of 100, and the next 0.05% would be given a TER of 99.95, and the next 0.05% would be given a TER of 90.90, etc.
It is slightly different with the UAI, because all the students in the age group cohort are included in the ranking process, but the concept is similar.
Does that help?