Read up on Punycode
http://en.wikipedia.org/wiki/Punycode
In a nutshell, newer web browsers (FF2+ and IE7+) can automatically resolve international (often non-latin) characters into the latin based punycode domain.
And in the near future, the TLD (the extension part, such as .COM) will may also be internationalized via aliasing (ie. verious translations of .COM would point to the current .COM automatically) - if that happens, IDN usage in gTLDs, such as .COM, especially in various asian countries, could skyrocket!
IDN conversion tool ... convert IDN to Punycode or Punycode to IDN. Ignore RACE encoding, which was used during the IDN testbed back in 2000 - it's been mostly all superseded by Punycode.
http://mct.verisign-grs.com/index.shtml
IDNs are big business, with better ones selling for many thousands of dollars. It's still a small market compared to traditional latin-based domains, but a rapidly growing one.
Check out NamePros.com IDN forum for more info.
Hope this helps.
Ron