Google Adsense is a simple to use and easy to set up service offered by Google.
Sign up for Google Adsense
It is free to sign up and can be live on your site in a matter of minutes.

What does it look like?
If you look at the upper right hand side of this site, you will see Google Adsense in action.

How does it work?
Once you create your free account, simple choose what type of add you would like. I most common ad unit is Adsense for Content. From there you have the option of an Ad Unit or Link Unit. Ad units contain either text ads, image ads, or both and are targeted to the content of your page using contextual and placement targeting. Link Units display a list of topics that are relevant to your page. When users click a topic, they’re brought to a page of related ads.

Next simply pick the size of your ad and color options. Google will provide you with a code to put on your web page and that is it. NOTE: It will take a few minutes for google to scan your site and start showing ads so don’t be alarmed when nothing is showing at first.

How Do I Get Paid?
Whenever someone clicks on your ad, you earn anywhere from $0.10 - $2.00 per click. It all really depends on how much the advertiser is paying to have their ads displayed.

Using Adsense Properly
Seems easy so far but make sure to read all of the guides Google provides on their site. The most adsense units you can display per page is 3. I recommend no more than 2 per site as it will look very cluttered and spammy. Also note that Google has taken several measures to fight Click Fraud. This means do not click on you own ads and hope to get a fat check because Google will shut you down immediately and will most likely not pay you for legitimate clicks as well.