CAT is a standard test to test students logical, mathematical and analytical and linguistic abilities.  The 2 ¹/₂ hour test comprises sub sections like :

Quantitative Ability (QA) - These questions are designed to stress more on reasoning skills of the candidates, rather than on their computational skills. The level of difficulty of this section is perceived to be higher because the questions are not only lengthy to read but at times require more effort in terms of understanding and solving.
Data Interpretation (DI) - This section based on basic mathematics presents data to the candidate in forms such as caselets, pie diagrams, bar graphs, etc and questions are set to evaluate the candidate’s skills at analyzing the given information
Reading Comprehension (RC) - CAT usually has 6-8 passages in the RC section, with an overall length of 4500-5500 words and about 50 questions to answer in a span of about 30 minutes. However this too can vary according to the level of difficulty of questions.
Verbal Ability (VA) - This section typically comprise sentence correction, sentence sequencing, verbal reasoning etc. VA explores a candidates understanding of the English Language and also tests their Reasoning Skills.

All the questions are multiple choice and the candidates should shade their choice of answer (only with a HB pencil) in the computer coded answer sheet. For every correct answer, one mark is awarded and for every wrong answer, ¹/₄th of a mark is deducted. 

The CAT score will remain valid for one year for all the IIMs.

Method Of Selection: The scores of each section and the overall score of the CAT are used for ranking and short listing the candidates for the second round which consists of group discussions and personal interviews.

A formal letter would be sent to the candidates by the respective IIMs for which the candidates have been short listed. GD & PI are conducted by each IIM separately and hence it is possible that a candidate may be asked by more than one IIM to attend GD/ PI on the same date and time. The basis of ranking and finally selecting the successful candidates is based on a diverse set of attributes and may include performance in CAT, performance in GD&/PI, academic, co-curricular and extra-curricular achievements, work experience etc. The weights given to each of these attributes may vary across IIMs as the admission process of each IIM, subsequent to CAT is independent.