I needed to create an ISO image from a CDR in MacOS Lion. Here is how I was able to do it:

Insert the CD.

Open the Disk Utility.

Click on the mounted CD in the Disk Utility.

Click New Image.

Select “DVD/CD master” for the Image Format.

Encryption: none.

Click Save.

This will create MacOS compatible .cdr image. To convert this image, so that it is Windows/Linux compatible:

Open Terminal and navigate to where you create your .cdr image.

Enter the following command:

hdiutil makehybrid -iso -joliet -o filename.iso filename.cdr