In R. v. M.C., 2014 ONCA 611 (CanLII), the Court of Appeal for Ontario provides a wonderfully clear and useful summary of hearsay, which for the most part I have excerpted below.
Hearsay is not an inherent characteristic of an item of evidence:
R. v. Baldree, 2013 SCC (CanLII),
 2 S.C.R. 520, at paras. 30 and 36.
The defining features of hearsay are two-fold:
i. the statement is adduced to prove the truth of what was said; and
ii. the absence of a contemporaneous opportunity to cross-examine the declarant.
Baldree, at para. 30; and R. v. Khelawon, 2006 SCC 57 (CanLII),  2 S.C.R. 787, at para. 56.
The touchstone for the admissibility of evidence that is said to be hearsay is the purpose for which the evidence is adduced. Evidence is hearsay – and presumptively inadmissible – if it is offered to prove the truth of its contents:
Baldree, at para. 36; and Khelawon, at para. 36.
The typical hearsay situation involves:
· a declarant (who does not testify);
· a recipient (who does testify);
· a statement (that is offered in evidence); and
· a purpose (proof of the truth of the contents of the statement).
The hearsay rule applies equally to out-of-court statements made by a witness who does testify in the proceedings when they are offered as proof of the truth of their contents:
Khelawon, at para. 37; R. v. B. (K.G.), 1993 CanLII 116 (SCC),  1 S.C.R. 740, at pp. 763-764; and R. v. Starr, 2000 SCC 40, 2 S.C.R. 144, at para 158.
The hearsay issue emerges in these cases when the witness does not repeat or adopt the information contained in the out-of-court statement and the proponent tenders the statement for the truth of its contents:
Khelawon, at para. 38.
The exclusionary effect of the hearsay rule is not absolute. Hearsay evidence may be admitted under the traditional exceptions, which remain presumptively valid but subject to challenge on the basis of lack of necessity or reliability:
Khelawon, at para. 42; R. v. Mapara, 2005 SCC 23 (CanLII),  1 S.C.R. 358, at para. 15.
Hearsay evidence may also be admitted if the proponent establishes the indicia of necessity and reliability under the principled exception:
Khelawon, at para. 42; and Mapara, at para. 15.
When the hearsay rule is summoned as a basis upon which evidence should be excluded, the first inquiry should be whether the proposed evidence is hearsay:
Khelawon, at para. 56.
The central focus of this inquiry should be on the purpose for which the statement is being adduced. It is only where that purpose is to prove the truth of the contents of the statement that the hearsay rule is engaged and refuge must be sought under a traditional or principled exception for the evidence to be admitted.
A traditional hearsay exception permits the introduction of evidence of spontaneous statements about a declarant’s current physical condition, mental state or sensory impression, as well as excited utterances. Necessity is based on expediency since no other equally satisfactory source for the evidence exists either from the declarant or elsewhere. Reliability is rooted in the spontaneous origin of the statement before there is time for concoction.
Under the principled exception, the necessity requirement may be met where the declarant is unable (or unwilling) to provide a full and frank account of the relevant events, including the ability to recall significant details. The reliability requirement may be satisfied by:
i. compliance with the indicia of B. (K.G.);
ii. the presence of adequate substitutes for testing truth and accuracy (procedural reliability); or
iii. sufficient circumstantial guarantees of reliability or an inherent trustworthiness (substantive reliability).
See, R. v. Youvarajah, 2013 SCC 41 (CanLII) at para. 30.
Where the hearsay rule is engaged, the prior statement is presumptively inadmissible. Whether the exception invoked to justify admission of the hearsay is traditional or principled, the conditions precedent or indicia are established on a voir dire:
Mapara, at para. 15.
[FN: In R. v. B. (K.G.),  1 SCR 740, 1993 CanLII 116 (SCC) (typically referred to as “KGB”), the Supreme Court of Canada held that there will be sufficient circumstantial guarantees of reliability to allow the jury to make substantive use of the hearsay statement: (1) if the statement is made under oath, solemn affirmation or solemn declaration following an explicit warning to the witness as to the existence of severe criminal sanctions for the making of a false statement; (2) if the statement is videotaped in its entirety; and (3) if the opposing party, whether the Crown or the defence, has a full opportunity to cross‑examine the witness at trial respecting the statement.]