1) An estimate is just that - an estimate. The school usually uses past results to determine your marks in your individual subjects and then your ATAR. This method is pretty inaccurate, because each cohort has individual strengths and weaknesses. However, most methods are pretty unreliable, because there is no definitive way of converting ranks into an ATAR.
2) Usually the cirriculum co-ordinator (sometimes known as a study co-ordinator, learning co-ordinator etc). Sometimes career advisors, year co-ordinators/advisors or even AP's do them
3) All schools offer them (some scholarships and med applications require them). At some schools they are available by request only whilst a few do them for all students.
4) Generally towards the end of the year (after the trials is the best time) but they can be done earlier if needed.
5) As above, any ATAR estimate you get is likely to be inaccurate as the processes are unreliable. An ATAR estimate should be taken with a grain of salt and be used as a general indication of what you might get.
6) It depends on the method - High Schools use past results and compare them to your rankings. Estimates done on BOS use ranks, school rank and other relevant info (trial marks is the main one). In my opinion, a BOS estimate is slightly better than a school one (many people will probably disagree with me here)
So overall the process isnt very reliable, just see it is a general idea of your possible mark.