Adsense is an advertising programe that run by Google. Google allow the publishers to publish the Ads given by them and they give a percentage of earning of that Ads. Google.com earns most of its revenue by allowing other website owners to advertise on their search result pages. All this is managed through a program they call AdWords.
Website owners can enroll in this program to enable text, image, and more recently, video advertisements on their websites. These advertisements are administered by Google and generate revenue on either aper-click or per-impression basis. Google beta tested a cost-per-action service, but discontinued it in October 2008 in favor of aDoubleClick offering.
We can earn a share of the revenue that Google earns from AdWords by placing these same text ads on your site. In other words, you're helping Google advertise and they pay you a percentage of what they earn.
