Cooperative communication is a powerful technology combating fading in wireless medium. In contrast to conventional cooperation (CC) which allows the relay to simply process and forward what it has heard, network-coded cooperation (NCC) endows network coding capability with the relay, i.e., allows the relay to first encode the data it has received from different sources and then forward the network-coded data to corresponding destinations. In this paper we systematically investigate the performance of NCC in terms of diversity-multiplexing tradeoff as well as exact system outage behavior. Under the assumption (denoted as A) that each destination can reliably overhear the data from other sources, we prove the diversity-multiplexing tradeoff of NCC outperforms that of CC. Moreover, we derive the close form of the system outage probability of NCC as a function of signal-to-noise ratio (SNR). The analytical and numerical results show that by requiring less bandwidth cost, NCC offers a similar or even reduced system outage probability compared with CC, and achieves the same full diversity order as CC at high SNR. Finally we discuss the performance of NCC in case the assumption A is removed. For a wireless network composed of N s-d pairs and a single relay, although there is a certain system outage probability increase for NCC, it still provides the same full diversity order of 2 as CC at high SNR, and has a diversity-multiplexing tradeoff superior to CC.