From all reports the best places to target your PPC campaigns are the obvious countries, USA, Canada, UK, Australia and New Zealand. But there is a catch, the ads cost are more to advertise to these countries, the trick is to begin your PPC campaigns to all other contries first, your cost per click will be very very low in the beginning, after a few days and your ads are running you can then add these 5 main contries. Once your click through rates are high your ads may be ranked higher than the more expensive ads.
it depends on what you are selling, but generally you want to target the Usa, Canada, Uk, Australia and New Zealand. You can later expand to Denmark and Singapore (based on experience).
Target people in your niche. For example, dont try give a weight loss product to people in a country thats known for hunger and malnutrition.
Usually, yes, it's only USA or USA and Canada. When I was using Adwords, I was targeting USA, Canada, UK & Australia.