Using Google AdSense
Google AdSense is the reverse of Google AdWords. While AdWords allows you to advertise your business with ads, AdSense allows you to make money by displaying other people's ads.
To understand how this works, you need to realize that when you buy AdWords, you aren't just buying placement on the Google search page. You're also (potentially) buying placement on third-party sites that use AdWords. Google's keyword matching system ensures that the ads are related to the content of the third-party site.
In other words, if you buy the keyword combination music classes, your ad might end up on a Web site that sells music instruments, but not one that's offering discount Beanie Babies. (Once again, the advertiser isn't charged unless a potential customer actually clicks the ad.)
Incidentally, AdWords users can opt out of this behavior by changing their campaign settings. When you set up your account, look for the check boxes named Content Search and Network Search and make sure they aren't selected, but leave Google Search checked. That way, your ads will appear only on Google search pages.
The Value of Ad Hosting
The amount your Web site can make from Google AdSense depends on the number of visitors you receive and the value of the keywords. (As mentioned earlier, it's the AdWords advertisers who determine the value of various keywords, through their bidding process.) You obviously won't make the full amount that Google charges advertisers for a click, but your profits will be broadly in line with those amounts. Keywords that are worth a few pennies will net you very little, but clicks on more popular keywords can add up quickly.
As a rule of thumb, AdSense makes great sense for getting value out of a content-based site--a site with reviews of computer hardware, for example, or one offering recipe advice.) However, AdSense makes a lot less sense if you're using your site to sell a product, in which case the advertisements will be distracting and can potentially compete with your own offerings.
Once you've signed up and established an account with AdSense, you'll need to wait a few days before your account becomes active. During this time, Google will make sure your site doesn't violate its AdSense policies. (For example, Google wants to be sure that your site doesn't promote illegal activity, that its content isn't blatantly copied from another site, and that it isn't a "shell" site set up simply to get money from ad clicks.)
Once you receive an e-mail from Google telling you that your site has been accepted, you can generate an ad bar. Google takes great pains to make AdSense as unobtrusive (and as unobnoxious) as possible. When you create your ad bar, therefore, you can choose the format, the number of ads, and the background color, so that the bar blends into your Web site as seamlessly as possible.
Finally, don't even think about clicking on your own ads to make yourself some money. Google uses fraud detection to spot abuse. It looks for clicks that happen too quickly to be humanly possible, repeated clicks from the same domain, and various other hallmarks of fraud. If it suspects that your business is abusing the system, it will drop you from AdSense altogether.