AdSense is a pay-per-click network, meaning publishers earn only when the contextual advertisements on their pages are clicked by visitors to the site. Each time a click is made on an advert a small cash amount is added to the publishers account.
AdSense advertisements are shown on lots of sites around the net, including on the websites of many big-name multinationals.
These ads are distinguishable by the text 'Ads by Goooooogle' (yes 6 "o"'s appearing next to the text advertisements.
There are several different ad formats or layouts, enabling publishers to fit the ads around their existing comment. The 'theme' or colour scheme for the ad units is also customisable to ensure the ads fit in alongside the existing page design.