  The paper develops a finite element method for partial differential equations
posed on hypersurfaces in $\mathbb{R}^N$, $N=2,3$. The method uses traces of
bulk finite element functions on a surface embedded in a volumetric domain. The
bulk finite element space is defined on an octree grid which is locally refined
or coarsened depending on error indicators and estimated values of the surface
curvatures. The cartesian structure of the bulk mesh leads to easy and
efficient adaptation process, while the trace finite element method makes
fitting the mesh to the surface unnecessary. The number of degrees of freedom
involved in computations is consistent with the two-dimension nature of surface
PDEs. No parametrization of the surface is required; it can be given implicitly
by a level set function. In practice, a variant of the marching cubes method is
used to recover the surface with the second order accuracy. We prove the
optimal order of accuracy for the trace finite element method in $H^1$ and
$L^2$ surface norms for a problem with smooth solution and quasi-uniform mesh
refinement. Experiments with less regular problems demonstrate optimal
convergence with respect to the number of degrees of freedom, if grid
adaptation is based on an appropriate error indicator. The paper shows results
of numerical experiments for a variety of geometries and problems, including
advection-diffusion equations on surfaces. Analysis and numerical results of
the paper suggest that combination of cartesian adaptive meshes and the
unfitted (trace) finite elements provide simple, efficient, and reliable tool
for numerical treatment of PDEs posed on surfaces.
