I cannot tell you about the conditions of the "Eurail pass", but reservations at the Deutsche Bahn usually work like this:
Reserving a seat in the Deutsche Bahn trains costs 2.50 € when you buy it together with the ticket at the ticket machine, and 4.50 € when you buy it at the counter in the Reisezentrum; this is possible until the last moment (I think).
A reservation has two numbers: "Wagen" (wagon) and "Platz" (seat). On the platform, there are big cubes with letters A-F hanging from the ceiling, and a diagram "Wagenstandanzeiger" where you can find out roughly where each wagon will come to halt, so that you do not need to wander through the train too long, dragging your suitcase.
The seats are often marked only with "ggf. freigeben" (roughly "vacate if necessary"), which means that other people may sit there but have to vacate the place for you when you show your reservation. The seat numbers are often confusingly ordered (I have not yet determined the logic behind this).
There are times, like Friday evening and Sunday evening, where it is really recommendable to have reservations. When you look up a connection on the internet site (bahn.de), you will sometimes see this big R when looking at the train details:
which means that this train will be quite full, so reservations are recommended. If you do not have a reservation, it is often the wagons at either end of the train which have some free seats.
The Deutsche Bahn has found it worthwhile to partially repeat announcements on the stations and in the trains in bad English with bad accent, which might help you a bit.
