Google Adsense is the publisher half of Google's advertising service. To save you having to find the sites that want to advertise on your site all by yourself you can use a third party service such as Google's to find the advertisers for you. The advertisers sign up with Google's Adwords service to have their ads displayed both on Google's own pages and on sites signed up for Google's Adsense service. There are quite a few other third party providers of advertising services, the main benefit of the service provided by Google is the large number of advertisers signed up with Adwords and the ability of Google to determine which of those ads are most relevant to particular content.
You can define as many different ad blocks as you like and use up to three of them in any one web page. Each adblock also has a unique code that allows you to track which ad blocks in your page that people are clicking on. You can change the colours of the ad at any time allowing you to try out different colour schemes where the ad blends in with the rest of the page and also where the ads stand out from the rest of the page.
Google decide which ads to display where on the basis of which placements they believe will get the best result. The idea is to get the most people clicking on the best paying ads. Google does this in part by working out what your page is about and attempting to display ads that are most likely to be of interest to your visitors.
You do have some control over the ads that are displayed in that you can provide a list of ads to Google that you do not want to have displayed. This allows you to block ads from your direct competitors displaying on your pages.
The way Adsense works is that the Adwords advertisers agree to pay Google a certain amount for each person who clicks on their ad and therefore visits the site being advertised. They pay Google for a specific number of click throughs at the agreed rate per click. Google then tracks when people click on the ad links displayed either on their own site or through Adsense and will continue looking for places to display the ad until the advertising credit has been used up. To prevent misuse of the Adsense service Google will disregard clicks where it believes that someone is simply clicking on lots of ads on a particular site in an attempt to gain income without having any real interest in the sites being advertised. Where the ads clicked on are displayed through Adsense Google will credit the Adsense account with a portion of the amount collected from the advertiser. The difference between the amount paid from an Adwords advertiser and the amount received by an Adsense publisher is Google's commission for providing the service that linked the two together in the first place.
When the income credited to an Adsense account reaches a certain level by the end of the month then Google will pay out that amount toward the end of the following month. Where the amount is below the payout threshold the amount will be rolled over and added to the following month's earnings in determining whether the payout threshold has been reached.
This article written by Stephen Chapman, Felgall Pty Ltd.