Pay-Per-Click advertisements (PPC)
Advertisers specify the words that should trigger their ads and the maximum amount they are willing to pay per click. When a user searches Google's search engine on www.google.com (or the relevant local/national google server [e.g. www.google.fr for France]), adverts (also known as creatives by Google) for relevant words are shown as "sponsored links" on the right side of the screen, and sometimes above the main search results.
The ordering of the paid listings depends on other advertisers' bids (PPC) and the "quality score" of all ads shown for a given search. The quality score is calculated by historical click-through rates and the relevance of an advertiser's ad text and keywords, as determined by Google. The quality score is also used by Google to set the minimum bids for an advertiser's keywords. The precise formula and meaning of relevance and its definition is in part secret to Google and whose parameters can be dynamically changed.
The auction mechanism that determines the order of the ads has been called a "generalized second price" auction. It is a variation of the Vickrey auction.

Site targeted advertisements
In 2003 Google introduced site-targeted advertising. Using the AdWords control panel, advertisers can enter keywords of interest, and Google offers to place ads on what they claim are relevant sites within their content network. Advertisers then bid on a cost per impression (CPM) basis for placement.

Advertisers can also enter domains directly. Google will provide a list of related sites that you can select along with your entered site.
Site targeting campaigns are mainly designed for branding purposes, as the ROI will almost always be considerably lower than a traditional content-targeted campaign. Your ad will take up the entire ad block (as opposed to being 1 of 4 ads in a traditional AdSense ad unit), which will make it more prominent but cost quite a bit more. The minimum CPM you can set on a Site-Targeted campaign is 25 cents.

AdWords distribution
All AdWords ads are eligible to be shown on www.google.com. Advertisers also have the option of enabling their ads to show on Google's partner networks. The "search network" includes AOL search, Ask.com, and Netscape. Like www.google.com, these search engines show AdWords ads in response to user searches.
The "content network" shows AdWords ads on sites that are not search engines. These content network sites are those that use AdSense, the other side of the Google advertising model. AdSense is used by publishers who wish to bring traffic to their websites. Click through rates on the content network are typically much lower than those on the search network and are therefore ignored when calculating an advertiser's quality score.
Google automatically determines the subject of pages and displays relevant ads based on the advertisers' keyword lists. AdSense publishers may select channels to help direct Google's ad placements on their pages, to better track performance of their ad units. There are many different types of ads you can run across Google's network, including text ads, image ads (banner ads), local business ads, mobile text ads, and in-page video ads.
Google AdWords' main competitors are Yahoo! Search Marketing and Microsoft adCenter.

AdWords Account Management
To help clients with the complexity of building and managing AdWords accounts search engine marketing agencies and consultants offer account management as a business service. This has allowed organizations without advertising expertise to reach a global, online audience. Google has started the Google Advertising Professionals program to certify agencies and consultants who have met specific qualifications and passed an exam. Google also provides account management software, called AdWords Editor.
Another useful feature is the My Client Centre available to Google Professionals (even if not yet passed the exam or budget parameters) whereby a Google professional has access and a dashboard summary of several accounts and can move between those accounts without logging in to each account.

Click-to-Call
Google Click-to-Call is a service provided by Google which allows users to call advertisers from Google search results pages. Users enter their phone number, Google calls them back and connects to the advertiser. Calling charges are paid by Google.

History
The AdWords product was launched in 2000. At first advertisers would pay a monthly amount, and Google would set up and manage their campaign. To accommodate small businesses and those who wanted to manage their own campaigns, Google soon introduced the AdWords self-service portal. As of 2005, Google provides a campaign management service called Jumpstart to assist advertisers in setting up their campaigns.
In 2005, Google launched the Google Advertising Professional (GAP) Program to certify individuals and companies who have completed AdWords training and passed an exam. Due to the complexity of AdWords and the amount of money at stake, some advertisers hire a consultant to manage their campaigns.

Legal context
AdWords has generated lawsuits in the area of trademark law and click fraud. In 2006, Google settled a click fraud lawsuit for US$90 million.
Overture Services, Inc. sued Google for patent infringement in April 2002 in relation to the AdWords service. Following Yahoo!'s acquisition of Overture, the suit was settled in 2004 with Google agreeing to issue 2.7 million shares of common stock to Yahoo! in exchange for a perpetual license under the patent.

Technology
The AdWords system was initially implemented on top of the MySQL database engine.