The Google AdSense program allows affiliate advertisers to have Google place related product 
or service ads on their sites. If a site viewer clicks on one of these ads the site earns a commission. The amount of commission earned is determined by the value of the keyword. Advertisers determine the value of keywords by bidding on keywords that they would like to use for advertising their sites products or services. The more the advertiser is willing to pay the better their site is placed in the search results and the more likely someone will click through to their site. Once a person clicks on a Google Sponsored link a charge is made to the site account. The charges can range from a few cents to several dollars. Affiliate advertisers work hard to achieve high page ranking for particular keywords to attract more traffic and therefore earn more commissions.
The Learn Internet Marketing Tools website has some additional information you might find useful.
i am really very thankful that Google launched the Adsense program. this enables most of us who owns several websites to work at home.