The concept is really simple, if you think about it. The publisher or the webmaster inserts a java script into a certain website. Each time the page is accessed, the java script will pull advertisements from the Google Adsense program. The ads that are targeted should therefore be related to the content that is contained on the web page serving the ad. If a visitor clicks on an advertisement, the webmaster serving the ad earns a portion of the money that the advertiser is paying the search engine for the click. For example, you have a site about real estate, the ads will mainly be real estate related.

The search engine is the one handling all the tracking and payments, providing an easy way for webmasters to display content-sensitive and targeted ads without having the hassle to solicit advertisers, collect funds, monitor the clicks and statistics which could be a time-consuming task in itself. It seems that there is never a shortage of advertisers in the program from which the search engine pulls the Adsense ads. Also webmasters are less concerned by the lack of information search engines are providing and are more focused in making cash from these search engines.

The first reason why Adsense is essential for content sites is because it already has come a long way in understanding the needs of publishers and webmasters. Together with its continuous progression is the appearance of more advanced system that allows full ad customization. Webmasters are given the chance to choose from many different types of text ad formats to better complement their website and fit their webpage layout.

The different formatting enables the site owners the possibility of more click through from visitors who may or may not be aware of what they are clicking on. It can also appeal to the people visiting thus make them take that next step of looking up what it is all about. This way the people behind the Adsense will get their content read and making profit in the process.

The second reason is the ability of the Adsense publishers to track not only how their sites are progressing but also the earnings based on the webmaster-defined channels. The recent improvements in the search engines gives webmasters the capability to monitor how their ads are performing using customizable reports that has the capacity to detail page impressions, clicks and click-through rates. Webmasters and publishers can now track specific ad formats, colors and pages within a website. Trends are also easily spotted.

With the real-time reporting at hand, the effectiveness of the changes made will be assessed quickly. There would be time to sort out the contents that people are making the most clicks on. The ever-changing demands would be met while generating cash for the webmasters and publishers. The more flexible tools are also allowing webmasters to group web pages by URL, domain, ad type or category, which will provide them some accurate insight on which pages, ads and domains are performing best.

The last and final reason is that the advertisers have realized the benefits associated having their ads served on targeted websites. Thus increasing the possibility that a prospective web surfer will have an interest in their product and services. All because of the content and its constant maintenance. As opposed to those who are no using Adsense in their sites, they are given the option of having other people do their content for them, giving them the benefit of having successful and money-generating web sites.

Adsense is all about targeted content, the more targeted your content is, the more target the search engines’ ads will be. There are some web masters and publishers who are focused more on their site contents and how best to maintain them rather than the cash that the ads will generate for them. This is the part where the effectiveness is working its best.

There was a time when people were not yet aware of the money to be achieved from advertisements. The cash generated only came into existence when the webmasters and publishers realized how they can make Adsense be that generator.

CTR (Click Through Ratio) plays a big role in monetisingyour website. Earnings can be improved with a few tips to increase your CTR.

1. Better Ad Placement : A good placement of Adblock can increase the CTR substantially. Above the “fold” is a preferable placement. A large rectangle at the upper fold can draw attention to the ads. A Leaderboard adblock can also perform well there. Similarly, a link unit under the navigation menu can also increase CTR. For Blogs and Content Sites, A large rectangle wrapped in the contents can also perform good. And, when visitors reach at the bottom of the page, they might want to leave your site to find a better resource. So, why not give them a chance to click on ads while they leave. Adding a Leaderboard or link unit just above the footer might be useful for this.
2. Blending Ads : Blending ads also plays a big role in CTR. Blending helps to camouflaged the ads. The title of the ads should be similar in color to the links of your site and the description and the url should be similar in color to your content. The background and border of your ad unit should match your page’s background which will make it hard to distinguish between the adblock and your content.
You can also attract visitors to ads by placing a high contrast adblock (Like, using a black background and white ads for a white background site). Remember, visitors will surely be attracted, but you may loose returning visitors.
3. Relevant Ads : When a visitor comes to your site,  provide them the useful information so they will stay. They will only click on the ads when they find it related to what they are looking for. You would not expect them to click on a washing machine ad on your jewelry site. So, getting targeted ads is a must.

Google made an announcement about AdSense for domains extension to all publishers on 11 December. This would means that all the AdSense publishers will be allowed to displayed AdSense ads on their undeveloped domains to generate extra AdSense revenue. Anyone that owns one or more domain names that left unused (have no website built in) can apply for this program.

To get started, check out their setup instructions, and visit the Help Center for more information.

ContextWeb

ContextAd provides a dramatic increase in click throughs, resulting in higher effective CPMs. Matching the most appropriate spots to the most appropriate advertisers translates into the ability to better manage and sell inventory. Additionally, the technology’s unique ability to bridge keyword and category targeting means it can access new inventory that publishers can offer advertisers, creating entirely new revenue streams. These factors represent critical competitive and economic differentiators in the rapidly evolving contextual advertising category.

• Monetize your existing inventory. Create new inventory.
• Customize creative to suit the look and feel of your site.
• Online reports show you real-time revenue. Access them online 24/7.
• Business terms are fair and transparent.
• Sign up is easy. Start using ContextAd within minutes.

Cool Widgets that actually make you money on your site - sign up today and WidgetBucks will add a $25 credit to your account.

Google is now offering a beta program  which allows for advertising to be placed at the start, end or in between levels of online games.

See Publisher Benefits

Inside Adsense explains it better than I can

When you are trying to make money off of the articles on your website, it is important to effectively promote your site so that you will attract customers and they can see just what a good, quality site you have. There are several ways so market and promote your website, one of them being though banner advertisements.

What Banner Ads Can Do For You

Banner ads can help bring visitors from others sites to your own. Although monthly fees can be expensive to advertise on high traffic sites, in the end it may be cheaper and/or a faster way to start seeing significant revenue from your website efforts, rather than waiting for SEO techniques to bring your own site to the top of search engine results. Aside from paying to advertise on someone else’s site, there are also free banner exchanges to choose from. We will look at the pros and cons of each banner advertising method below.

Free Banner Exchanges

Free banner exchanges are when you and other sites exchange each others banners. Their banner will go on your site and your banner will go one their site. Although this option is free, there are two main problems with it. First, if you want your banner on a significant number of sites, it will mean cluttering your own site up with these banners. This could even shot you in the foot if you run an affiliate website because, instead of clicking on your affiliate links, your visitors may be clicking on your banner exchange links. Secondly, you have to be really careful about the types of sites that you exchange banners with. Some sites like to gather a lot of banners so that they can be a directory or portal site and not have to have any real content. These “banner farms” or “link farms” will do nothing positive for your site and, in the meantime, you will be bringing them potential traffic.

Paid Banner Ads

As we saw above, paid banner ads cost money, but they will eventually pay off if you choose the right ones. You need to ensure that the site produces the amount of traffic that they say and that they have your ad placed in a way that invites visitors to click without being too pushy. You also want to choose a site that does not house too many other banners on the same page as yours or that there are no competitor links on the same page.

All in all, banner ads can end up being profitable for you site if you go about it the right way. If you do decide to check out banner advertisement as a marketing avenue, be sure to keep the above tips in mind.