I am a Chinese student in the US.?
You don't need to send your passport. You do need to send a notarized copy of you passport (front and back pages). You also need to send one photograph and attach it on the application form. The embassy won't send back anything you. They don't need to attach a paper visa on your passport since they adopted an electronic system. When you enter the customs at Sydney airport, they just need to scan your passport. This answer applies to those in US and China. Not sure about other countries.