How AdSense works....

• In order to put ads on a web page, the webmaster adds a JavaScript code to its source code.
• Each time a visitor visits a page with an AdSense tag, the JavaScript creates an iframe, 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 site targeted ads, the advertiser can choose the page or sites it wants to display ads on and pays on a CPM basis (cost per thousand impressions).
• For referrals, Google manages 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.
• Since the JavaScript is sent to the browser when the page is requested, it is possible to others to copy the JavaScript on to their own web pages. To protect against this, AdSense hosts can set what pages their code is allowed to put ads on. In that case, clicks from other than the specified web pages are ignored by Google.