AdSense Secrets

AdSense is an ad serving program run by Google. Website owners can enroll in this program to enable text, image and, more recently, video advertisements on their sites. These ads are administered by Google and generate revenue on either a per-click or per-thousand-impressions basis. Google is also currently beta-testing a cost-per-action based service.

How AdSense Works
Each time a visitor visits a page with an AdSense tag, a piece of JavaScript writes an iframe tag, whose "src" attribute includes the URL of the page.

For contextual advertisements, Google's servers use a cache of the page for the URL or the keywords in the URL itself to determine a set of high-value keywords. (Some of the details are described in the AdSense patent). If keywords have been cached already, ads are served for those keywords based on the AdWords bidding system.

For referrals Google manage the subscriptions on a long term, to add money when the visitors either download the product of subscribe, that depend upon the sort of product.

For search, advertisements are added to the list of results and clicks on them make money.

To protect webmasters from bad use of their code, it is possible for them in the configuration panel to make a list of websites where advertisement are published. When other sites use their JavaScript code, clicks on ads are ignored.

Reference: Wikipedia

*Google PPC: Content or Search?

*Top Paying Keywords