Affiliate marketing is one way to make money on the internet. The other big ways is Google's AdWords and AdSense. Here I will briefly discuss the difference between affiliate marketing and the other 2 common methods.
Google's AdSense is free. It involves putting ads on your website and once you have registered for the service these ads will specifically be linked to your site. Every time someone clicks on one of these ads you get paid. Pretty simple right? The biggest disadvantage of this is that you need to drive traffic to your site. Most people start with a blog since they are usually free through sites like blogger.com.
Google AdWords is a little different in that you are essentially the one writing the ads. You pick keywords and a product. When these keywords are searched there is a chance your ad will appear in Google on the left hand side under the sponsored links section. How often this happens depends on the budget which you set. This is linked to affiliate marketing in that the way which you make money is by selling the product. You pick the product, write the ad, someone clicks your ad, buys the product, the company pays you. The obvious downside is that you really need to pick your words carefully so as to specifically target customers looking for this product. In this sense AdWords can be a little tricky and even expensive if you are too broad.
Another version of affiliate marketing is by using a website to drive traffic to a site in order for them to sell a product without using ads. The idea is you sell the customer an idea so that they click on the website and the website has a sales page which sells them the product. I've clicked these before, I've bought from these before and now I even do the same thing for the ones which I liked. This is by far the easiest and cheapest way of starting off making money on the internet via affiliate marketing.