The first question that you may be wondering... How does Google Adwords work? It's actually very simple.
Adwords is a Google service, in which you (the advertiser) can market your website by using customized, premium placed advertisement links.
Do a quick search using Google. Search for anything you want, anything at all, but try and search for something general, such as "computers."
When your search results pop-up, you should see some highlighted results towards the top of the page and some "select" results toward the right of the page. These results will also be marked with the words Sponsored Links.These are Adwords advertisements.
Now, you may be saying... these are not Adwords advertisements, they're Adsense advertisements. You are right, they are Adsense advertisements, but they are Adwords advertisements as well. It all depends on which side of the spectrum you are on. These types of links are Adsense advertisements to people who publish them. They are Adwords advertisements to people who create them.
Below, is the Adwords process.