What IS a 'Reality show'?

What constitutes a "Reality" show? The people seem to be the actual people, not actors, but are the dialogue and events spontaneous and unrehearsed, or scripted? (Since the action is recorded with camera and crew right there, it seems that there has to be at least some degree of "unreality" involved, i.e. the show has to be "set-up", at least in part.) Are the characters "playing" themselves, or are they behaving spontaneously without any limits on what they say or do?

By comparison, I interpret a "documentary" to be strictly "real" - i.e. actual subjects depicted, actual, unrehearsed, unscripted dialogue and/or events. A "docudrama", as far as I can determine, always uses actors depicting real people and events, and is always scripted (i.e. it's an acted-out drama). Am I correct about this?