Google Adwords

Google Adwords allows you to advertise your business through Google.  Ads are displayed depending on the keyword(s) that have been setup for that campaign.  A business can have multiple ads across many campaigns.  The Ads are displayed in the positions at the top and at the side of Google search.  Ads can also be shown on their Google Network.  This network includes 3rd websites running Google Adsense and sites like GMail and Google Maps.

Google Adwords

In terms of what it costs you is purely dependent on your budget.  The minimum spend is £1 a day (£30/month) but most companies with a marketing budget will easily spend upwards of +£1000/month.  Adwords does allow the 'little man' to show ads with the big guys, but once the daily budget has been reached then they are no longer in the game for that day.

Adwords allows you to manage a variety of formats which include text, image and video.

Please further information can be found from Growing Your Business With AdWords and also in the Adwords Beginners Guide.