How do you setup a project that can result in a jar library file that can be used for android? I want to create a custom library across all projects.

Few other questions:

1. Does it need to be compiled against a specific version of android sdk?
2. When an android package is compiled against a jar library does the classes necessary to work with the code get compiled with main code into the apk or does the entire jar get included?
3. Any notable optimizations or pitfalls I need to know about with using a jar instead of integrating the code directly?
4. Does the jar have to be signed like the apk needs to?