Doug,

Here it goes:

W - "wagen" - german for vehicle
116 - I believe this is the internal project designation code MBZ used for that series. Same for all models, 107, 126, 140,124, etc were all internal control numbers.

300 - not in cubic centimeters but in deciliters. Total displacement 3000cc or 3 liters.
S - Luxury series, I believe this designation started around 1958 or 1959 with the first 220S and the term "S class" was introduced in the mid 1980's as an advertisement slogan.
D - Diesel
In the case for example of the 450SL, etc...

R107:

R - roadster
107 - internal control number
SL - "sport leicht" - light sport
450 - displacement 4.5 liters
Hope clarifications help.
Regards,
Joe Brasileiro
1980 450SEL
1987 Jaguar XJ6