Hello.
You'll run into the ; almost all countries in mainland Europe have open borders, but as a traveller from outside that region, you can only stay within this entire region for a maximum of three months; or more accurately, within any given 180 day period (sliding window), you can have been inside for a maximum of 90 days (including arrival and departure days).
Since you're Australian, the easiest way to get around that is to get a WHV, which'll allow you to stay in your host country for a year. For the other countries, the Schengen rules still apply, but that just means you'll see that country in depth, and have a good base from which to easily explore the other countries for about 50% of the time. The UK is the most common choice for Australian backpackers, given the lack of language barrier, but the UK itself isn't part of the Schengen zone, so it's at the cost of some flexibility.
They're currently working on a new type of visa which will allow you to stay in Europe for much longer, as long as you keep travelling around, but I haven't heard anything at all yet for when this gets implemented, so I wouldn't expect it to be anytime soon, alas.
I don't know anything about proof of onward travel; I imagine it's not so important in Europe, but will gladly defer to someone with more in depth knowledge there.
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