Marx’s "scale" trains are actually 1/64,. This is also known as 3/16" scale, which is 1/64 of a foot. The idea of running this scale on O track came from A.C. Gilbert. In the late 1930s, he had the idea of a more scale-size operation by using a smaller train. Today, most of the trains sold as O27 are 1/64 to 1/60 in scale.
The benefit is having a smaller train running on the more popular and cheaper O gauged track. This is ideal for smaller model railroads. We can compare the older O / O27 to S and HO scales. O27 has a 27" diameter curve; classic O is 31". Though it has a 30" diameter, 15" radius curve, HO generally tends to start with 36" diameter / 18" radius. The minimum curve for American Flyer S gauge track is 40" diameter.
Smaller trains provide more action in smaller spaces. For those working in the O and O27 range, the old Marx "scale" line fits the bill. Other trains that work as O27 are the Industrial Rail O27 freights, the Lionel and Williams 12" streamliner passenger cars and the K-Line plastic streamliners. The K-Line Alco FA is also scaled just right for O27.
The old Marx buildings, most of which were reissued by K-Line and "K-Line by Lionel" have 1/64 dimensions such as doorways. Plasticville is a sort of middle ground between O and S. Some of the folks supplying the fantasy gamers make structures and other items. Check them out to make sure they are usable with your trains.
Several Lionel accessories are also closer to 1/64 than 1/48.