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If a master server does not write a statement to its binary log, the statement is not replicated. If the server does log the statement, the statement is sent to all slaves and each slave determines whether to execute it or ignore it.
On the master, you can control which databases to log changes for
by using the --binlog-do-db and
--binlog-ignore-db options to
control binary logging. For a description of the rules that
servers use in evaluating these options, see
Section 15.2.3.1, “Evaluation of Database-Level Replication and Binary Logging Options”. You should not use
these options to control which databases and tables are
replicated. Instead, use filtering on the slave to control the
events that are executed on the slave.
On the slave side, decisions about whether to execute or ignore
statements received from the master are made according to the
--replicate-* options that the slave was started
with. (See Section 15.1.3, “Replication and Binary Logging Options and Variables”.)
In the simplest case, when there are no
--replicate-* options, the slave executes all
statements that it receives from the master. Otherwise, the result
depends on the particular options given.
Database-level options
(--replicate-do-db,
--replicate-ignore-db) are checked
first; see Section 15.2.3.1, “Evaluation of Database-Level Replication and Binary Logging Options”, for a
description of this process. If no matching database-level options
are found, option checking proceeds to any table-level options
that may be in use, as discussed in
Section 15.2.3.2, “Evaluation of Table-Level Replication Options”.
To make it easier to determine what effect an option set will
have, it is recommended that you avoid mixing “do”
and “ignore” options, or wildcard and nonwildcard
options. An example of the latter that may have unintended effects
is the use of --replicate-do-db and
--replicate-wild-do-table together,
where --replicate-wild-do-table
uses a pattern for the database name that matches the name given
for --replicate-do-db. Suppose a
replication slave is started with
--replicate-do-db=dbx
--replicate-wild-do-table=db%.t1.
Then, suppose that on the master, you issue the statement
CREATE DATABASE
dbx. Although you might expect it, this statement is not
replicated because it does not reference a table named
t1.
If any --replicate-rewrite-db
options were specified, they are applied before the
--replicate-* filtering rules are tested.
In MySQL 5.1, database-level filtering options are
case-sensitive on platforms supporting case sensitivity in
filenames, whereas table-level filtering options are not
(regardless of platform). This is true regardless of the value
of the lower_case_table_names
system variable. These are known issues which are fixed in MySQL
5.5.

User Comments
Just a note on replicating QUALIFIED statements.
Because I'm lazy and never select db's before running a query, I use qualified statements for ALL my queries. ie:
Instead of:
USE foofar;
INSERT INTO fling VALUES( 'w00t' );
I do:
INSERT INTO foofar.fling VALUES( 'w00t' );
This was a problem when I went to set up replication. After much research, I found the solution (works with 4 and up):
In your MASTER my.cnf file, DO NOT put any 'binlog-ignore-db' or 'do-db' options. Any db's you wish to not replicate will be handled in the slave conf file ..
In your SLAVE my.cnf file, use a 'replicate-ignore-db=<db>' for all the databases from the master you wish to stop from replicating to the slave.
For all the db's you DO wish to replicate, use a 'replicate-wild-do-table=<db>.%' line.
You end up with a lot of extraneous binlog data for those tables you previously set to ignore in the master conf, but it saves you having to go through all your code and add 'use database' functionality
I believe the comment immediately above ONLY applies to Statement based replication. Row based should work fine with db.qualified queries.
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