Pay per click advertising describes a marketing procedure by which the search engine delivers its results to the searcher in rank order according to the amount the advertiser was prepared to bid for the position. In other words, if the customer typed in ''red widgets? and three advertisers had paid for ads including the words ''red widgets? at varying bid amounts, the customer would receive all three ads in response to his search, but the advertiser who had paid the most for the ad would be listed first then the second highest advertiser's bid, followed by the bid of the third advertiser. Since the customer would probably not look very far down a list of ranked ads, the advertiser who paid the most for the ranking would probably get the majority of the responses from customers.
So, if you as the advertiser, you bid a price per click to place your ad in a precise rank of the search results for a particular search keyword, your results or sales would probably be based on where your ad appeared on the search engine ranking.  You bid on keywords that the target audience would enter in the search bar when looking for the product or service. The ads which result are known as "sponsored links" or "sponsored ads" and appear next to the raw results on the page. Your cost would occur when the user clicked on the ad.
It's important to know what you hope to accomplish when using the pay-per-click advertising method. What are purpose and goals of your online business, and how well can you convey those purposes and goals when preparing your pay per click advertising. The choice of keywords and/or phrases is vital when accomplishing the goals you've set for your business.

Next, you need to decide on which search engine you will use for the pay per click advertising. Search engines basically come in three types:

With the keyword search engine, such as Google, Adwords or Yahoo! SearchMarket, the essence of the topic in question is captured in order to find web pages which match the search query.

When using the product search engine, such as NexTag, PriceGrabber.com and Shopping.com, advertisers provide details of their product information. When users search for a product, the links to the different advertisers for that specific product appear, giving a higher ranking to advertisers who pay more, but allowing the user to sort by price to see the lowest-priced product and then click on it to purchase
Under the concept of the service search engine, such as NexTag, Side Step and TripAdvisor, advertisers provide feeds of their service databases. When users search for a service, links to advertisers who provide that particular service appear, giving standing to advertisers who bid higher, but allowing users to sort their outcome by price or other methods.