Affiliate programs are commonly misunderstood, in order to understand affiliate programs lets start with terminology. For clarification purposes, an affiliate is defined as any "referrer" or website that promotes a product in an effort to earn revenue. A merchant is defined as someone who owns a product and is sharing revenues with an affiliate based on affiliate's performance. Affiliate programs can drive targeted traffic to your website.There are 3 basic affiliate programs, though only first two are commonly used.
Pay Per Click - this is when an affiliate is compensated for sending traffic to merchant. (AdSense is an example of PPC affiliate program)
Pay Per Sale - this is when affiliate is compensated by merchant if referral generates a sale or purchase.
Pay Per Lead - this is when merchant agrees to pay for a qualified (or sometimes unqualified lead), which is very uncommon because it is subjective and up to merchant.
Affiliate websites tend to provide information, entertainment, and content services to their customers. The online merchants sell products, goods and services online. These are programs permitting affiliates to earn money based on visitors to your site who click through to another's website. Some pay a token amount for click through and others provide a percentage of sales when a visitor "clicks through" to your site and buys a product or service on other party's site. This could represent a value added service to your visitors.
Affiliate programs allow you to pay and track incentives from other websites that send web surfers, leads or paying customers to your website. Commissions based on purchases made by traffic sent from referring website can be paid. Besides a commission, an affiliate can receive a flat fee, or other incentives for all valid transactions it refers that generate a sale or lead.
Be careful that affiliate's web page is not cluttered with banner ads that may crowd out your link, or that be annoying to customers. Affiliate programs enable affiliates to leverage their traffic and customer base in order to profit from e-commerce while merchants benefit from increased exposure and sales.