Game Distribution

It sounds like they are requesting to be a regional distributor (if that's not the case, if they're a single store i'd probably just say no, but if they're a chain, then evaluate based on the size of the chain relative to the country, and your particular goals for the product), and usually what it involves is exactly what you'd expect- you'd ship them a pallet (or a few pallets, depending on print run and market size) of your game, and they're the ones to whom you'd direct inquiries from concerning buying/stocking the product in that region.

However, as to the rest of the questions, It would vary depending on the company you are talking to. Distributors usually sell the game to retailers for 50% or 60% of retail, and you're selling it to the distributor at... we'll say half, but it can vary quite widely... half of the price they're selling to the retailer at. They'll have their own policies in place, so just ask them to write up their proposal and send it to you, and you'll look it over.