What's the deal with ADR's (American Depository Receipts)

[ExtraSlow]

OK, I've run across these a few times when looking at investing in international companies.
For example TAM airlines, based in Brazil.
TAM SA, traded in Sao Paulo http://finance.google.ca/finance?q=SAO%3ATAMM4
and TAM SA ADR, traded on the NYSE http://finance.google.ca/finance?q=NYSE:TAM

Is the idea that these will pretty closely track the performance of the actual stock, except be in US dollars and be traded on a US exchange?
Is there such a thing as a CDR, Canadian Depository receipt?
How would dividends or stock splits be handled, just like a regular equity?
Hopefully some of the more experienced traders on beyond can help out a noob.

[Sadboy]

In my limited knowledge
There are three levels of ADR.
1. Does not comply with SEC registration, only OTC
2. Complies and trades on exchanges
3. Actual IPO on the US market

When they are sponsored, they actually track the foreign stock. Most ADRs are the actual stock, adjusted for foreign exchange.

i wonder the same question if they dont pay dividends, how is fx their only adjustment for valuation?
wouldn't there be arbitrage?

Good question, can anyone give more insight?

[Canmorite]

ADRs carry prices in US dollars and pay dividends in US dollars.

http://en.wikipedia.org/wiki/American_Depositary_Receipt

As far as arbitrage goes, the US market and the market where the ADR originally trades would have to be open at the same time.

[ExtraSlow]

Found this on CDRs
http://www.financialpost.com/scripts/story.html?id=9df12ed3-6a71-49d1-95e9-ee9e19702457&k=61687