When I create new states for the page - the master is gone. It appears only on the first state and not on the others. Is that how it works or am I missing something? (CS5, ver 11.1, Windows 7)
You can share a layer to states by using the Options menu (top right corner of the Layers Panel) or right-click the layer in the Layers Panel and select "Share to States."
When a layer has been shared to states, an icon that looks like a film strip will appear to the right of the layer name, and if you edit the objects on that layer the change(s) will appear on all shared states.