Well – It seems to confuse a lot of people Robbo.
One way to think of it – is that all full sized engines were built to the same "scale" (e.g. 12" to 1 foot) but that they ran on a number of different track "gauges" (e.g. standard, narrow and broad gauges). The two measures are quite different really.
For any railway model to be accurate in scale terms there should be a close relationship between the 'scale' used to build the model and the track 'gauge' it is going to run on (or be associated with)
"16mm" is simply a catchall expression to describe narrow gauge models that generally run on 32mm or 45mm track – but the prototype N/G gauges varied somewhat, so 16mm engines tend to be very much scale approximations in many cases.
In Gauge '3' – we model standard gauge prototypes on 2.5" track, so there is not the same room for any confusion – the scale ratio is very clearly 1:22.6.
As perhaps an interesting aside (?) when I used paper & pencil to draw my models, I worked to 13.5mm to the foot to convert things to "scale" – very close but not exact. Now I use CAD – I can draw at "full size" and then scale everything exactly using a ratio of 1 to 22.6.
I was involved last year (with other G3S members) in developing a low-cost G3 battery electric 'Sentinel' kit. I did all the CAD work for it and it was quite pleasing somehow to be able to tell people at the AGM that it was built "exactly to scale" (OK – I'll admit small things do please me)
Regards, IanT

PS Unfinished prototype Sentinel kit at G3 AGM in February.