3 types of ways to generate income from your website...
Sales
Same as a brick-and-morter store, you have a product and you sell it -- but online. Amazon.com falls into this category, along with thousands of other merchants. Like a traditional business, you usually stock and sell products.
Sales, however, isn't necessarily limited to physical items. You can also create/sell software or services. Regardless of the product, your income comes from individuals who give you money directly.
Remember this model - as, in the end, this model is the basis of all income on the Internet and the real world.
Banner Advertising
This is the traditional approach to advertising on the internet. Banner ads are those 468x60 pixel graphics on the top of many of the websites you visit. Banner ads are paid for by other websites who want people to visit their website.
You can be paid based on how many times a Banner is displayed (per impression), or when a visitor clicks on it (per click).
Affiliate programs are a relatively new method of advertising on the internet. Because of the nature of the Internet, with some extra effort, companies can track where visitors are coming from and also what they do/buy on their site.
The natural extension of this is for companies to "hire" other websites (the affiliates) to send them visitors... but instead of paying them a flat rate (as in Banner Ads) - companies pay you based on what that visitor does once they reach the company site.
Payment can involve a percentage of sales, or a flat rate for a specific action -- such as joining a mailing list, or completing a form.
As a result, the more your visitors do, the more you are rewarded. Since a smaller percentage of your visitors will buy or signup for services, rewards for Affiliate programs tend to be higher.
