Fortunately, those of us in PAL-land don't have to worry about such things :-), but for historical technical reasons NTSC broadcasts 29.97 frames per second. If you round this to 30 and number your frames accordingly then timecode will no longer correspond to elapsed time, so to correct this drop frame timecode skips over certain frame numbers. The frames themselves aren't dropped, just the numbers. To understand what's going on better it might help to think it terms of simpler numbers. Imagine a system using 9.5 frames a second, say. You might label frames by counting 10 frames one second and 9 the next. You haven't lost a frame, just skipped one number every 2 seconds in your counting sequence to keep things in step. Drop frame timecode is the same, except it skips 2 frame numbers a minute, 9 minutes out of 10 ((10 minutes - 2*9) / 10 minutes = 17982/18000 = 29.97).

The most complete explanation:

http://www.adamwilt.com/DV-FAQ-editing.html

Also check the following excellent explanation (middle of the page)

http://www.elitegeek.org/modules.php?name=News&file=print&sid=321

Pascal