How AdSense Works

If you go to Google.com and do a search for almost any keyword phrase, you'll notice some "Sponsored Links" that appear on the right side of the screen that are relevant to the keywords you just searched for.
Website owners pay Google to display these ads and are charged a predetermined amount every time their ad gets clicked by a web surfer. With the AdSense program, you will display these same text ads on your site just like Google and get paid for it as well.
All you do is copy and paste some provided HTML code into your pages and Voila! the ads will show up. Every time an ad is clicked on your site, you will receive a certain percentage of what Google receives from the advertiser.
Once your account reaches $100, you'll receive a check in the mail.
"Is Google Crazy?"
I know what you're probably thinking...
"What's the catch here? Why would Google just give away money advertisers are paying them?"
The answer...
Because Google is very smart.
Now that I understand how AdSense works, I can see that it's a win-win situation for everyone involved, and the bottom line benefits Google. Let me explain...
Since the advertiser's ads are now being displayed on more web sites all over the internet (instead of just Google's site), they are getting much more exposure. More exposure means more clicks and even more traffic for their site over a shorter period of time.
This is good news for Google because the more traffic the advertisers receive, the faster their advertising funds are used up.
Remember, they get charged every time their site gets a visit; and of course, it is Google's hope that they'll continue to keep funneling more money into their account for more ad exposure.
What an ingenious way for Google to increase the amount of money they earn from advertisers while building loyalty with website owners (like us) who are now getting paid to help them advertise.
Of course, I'd expect nothing less from the most popular search engine on the web. :)