Google Adwords is the proprietary advertising program that produces those prime text only ads on the right hand side of its search engine results page.
Adsense is Google's syndication service for its AdWords ads. Adsense publishers show Adwords ads on their site, and are compensated for each ad that is clicked.
Indeed, Adwords is the advertising program through which people buy text ads from Google. Those ads can run on Google's site, on their partners' sites like another search engine for example. Advertisers PAY to run Adwords ads. They have the option of whether or not they want their ads to be run on the content network (publishers/webmasters websites) or not.
The Adsense program refers to the program that publishers sign up for to run those Google ads on their site. Adsense is the contextual ad program running on people's pages. Publishers do NOT pay; Google pays money to THEM for each click originating from their pages.

Google's AdWords program is a marvelous way for big and small advertisers to reach precisely the people they would like to reach. Ads placed via AdWords are almost always relevant to people viewing the ads; the ads are targeted using keywords selected by the advertiser and placed on Google search results pages where users have searched for these keywords (AdWords search network) or on web pages that publish content including the targeted keywords (AdWords content network).
In addition, it's estimated that ads placed using AdWords reach more than 80% of all Internet users. Unlike old-fashioned advertising, the AdWords delivery mechanism is completely managed from the Web and can be used by anyone who has a credit card. There's not even a minimum budget. You can design effective AdWords campaigns that drive traffic to your site for just pennies a day; of course, it always helps to have a bigger budget!

Putting AdSense code on your web pages is only the beginning to making money with Google AdSense advertising. Once you've added AdSense Content and AdSense Search to your pages, you need to know how well your AdSense revenue is doing in relationship to how well it could be doing. Monitoring your performance so you can make changes to make more money is a very important part of successfully working with AdSense.
There are some of the key issues or shall I say some really simple technique that all newbie should know:
1. Insert Ads into your post.
2. Filter unwanted or low paying ads.
3. Ping your blog, submit to all the search engines.

Google will review the web site address you provide for compliance with the content policies of the AdSense program (see https://www.google.com/adsense/policies for more information about AdSense policies). It is not unusual for Google to reject web sites for noncompliance with content provisions of the AdSense policies; the prohibitions range from excessive advertising content through adult content, content about hacking, and content using excessive profanity.
It is permissible (and often done) to use one Google AdSense account across multiple web addresses. If you are maintaining half a dozen sites, it is easier to work with a single AdSense account than to keep up with statistics on multiple accounts.
This leads to the possible scenario of submitting one URL for acceptance into the program and eventually placing AdSense ads on noncompliant sites. You could probably get away with doing this for a while, but it is a bad idea. If you are caught, Google will most likely terminate your entire account. The best approach is to apply for a separate account for any web site with questionable content. That way, you are aboveboard.

Publishers may well wonder where they should place AdSense ads on their pages for the best results. There's a great deal of speculation about AdSense ad placement in webmaster circles, and not much hard data.
It is clear that ads placed above the foldmeaning in the top third of the page, where they will be seen on any computer monitor without scrolling downdo better than ads placed lower in a page.
The best-performing AdSense ad format and position is Leaderboard (also called a horizontal skyscraper) close to the top of a page. The second-best format is one of the several vertical skyscraper formats (Skyscraper and Wide
Skyscraper), with the top ad very close to the top of the page, either along the left or right side. If a vertical skyscraper is positioned along the right side of a page, then you need to take care to use a page design with a total width less than 800 pixels so that the skyscraper along the right-hand side will display without horizontal scrolling on all monitors.
Beyond this basic placement information, you might want to consider whether it makes sense to put a great many ads on a single page (the Google limit is three ad units). There's something to be said for placing a great many ads on a page the variety might produce good choices for more visitors. However, the "noise" of displaying many ads can detract from your site, and some publishers get better results with fewer ads.
The bottom line is that you should experiment with ad placement and the number of ads on your site. What works well for your site is not necessarily what works well for another site, so there is no substitute for trial and error.

Google AdSense provides two programs you can use to make money from your web content:
- AdSense for Content
- AdSense for Search
These are different programs and work in different ways. AdSense Content places ads on your web pages, and you make money when a site visitor clicks on the ad.
The AdSense search box displays Google search results when a user enters a query. These search results show relevant ads. You receive a portion of the revenue generated when a visitor uses your search box and then clicks on an ad from the search results returned by Google.

AdSense is an advertisement serving program run by Google. While it may be alternating per impression and per click, be assured that google is trying to get you maximum profits as google gets a hefty percent of your success. Website owners can enroll in this program to enable text, image, and more recently, video advertisements on their websites. These advertisements are administered by Google and generate revenue on either a per-click or per-impression basis.