Contextual advertising is a form of targeted advertising for advertisements appearing on websites or other media, such as content displayed in mobile browsers. The advertisements themselves are selected and served by automated systems based on the content displayed to the user. See Wikipedia for more info.

Google AdSense was the first major contextual advertising program. It works by providing webmasters with JavaScript code that, when inserted into webpages, displays relevant advertisements from the Google inventory of advertisers. The relevance is calculated by a separate Google bot, Mediabot, that indexes the content of a webpage.

Googles Adsense programme delivers contextual ads that look like Adwords but are actually banners generated on the fly to partner sites. Resources..

Since the advent of AdSense, Yahoo! Publisher Network, Microsoft adCenter, Ad-in-Motion and others have been gearing up to make similar offerings.

Here’s one best example of ad text for PPC Campaign on Google Adwords:
Save 20% OFF Pumice Stone —-> Strong word (SAVE). Contrast (OFF - capitalize)
Pumie Offers A 3-day Special Promo —-> Branding (Pumie - fictitious company name), Urgency (3 day special Promo)
Get Your Pumice Stone For Only $3! —-> Call to action (Get). Detailed ($3 and 20%)
www.Example.com —-> Display URL is your site

Also, notice the first letter of each word used - all are uppercase

Visit http://adwords.google.com/support/bin/answer.py?hl=en&answer=39431 for more info on how to create competitive Text Ads.

A system to advertise on Google & partner sites on a CPC (cost per click) basis. A method to advertise your business to a targeted audience anywhere in the world.

AdWords is Google’s flagship advertising product and main source of revenue ($16.4 billion in 2007)[1]. AdWords offers pay-per-click (PPC) advertising, and site-targeted advertising for both text and banner ads. The AdWords program includes local, national, and international distribution. Google’s text advertisements are short, consisting of one title line and two content text lines. Image ads can be one of several different Interactive Advertising Bureau (IAB) standard sizes. Wikipedia

What to do and how does it works?

• You create your own ads
  • Text Ads
  • Image Ads
  • Flash Ads
  • Mobile Ads
  • Video Ads
  • Ads for TV, Radio, and Print
• Choose the specific keywords that will trigger your ad
• You only pay when someone clicks on your ad

Where does your ads show? Sample search: Car

Why to use adwords?

• Its easy to setup
• You can control your spending (Budget Management)
• You can easily evaluate result
• You can target ads to users in a specific country of a specific language

I’m having a hard time before on linking Adwords to Analytics. I thought 2 different accounts cannot be link together. After reading Google Analytics help it shows me that its so easy.

Steps on linkng adwords to analytics:

• Make sure you’ve used the same Google Account for both your Analytics and AdWords accounts and that the login has Admin access on the Analytics account, or;
• If you haven’t used the same Google Account, simply add your AdWords username to your Analytics account as an Account Admin (learn how).

Then:

• Log in to your AdWords account at https://adwords.google.com.
• Click the Analytics tab.
• If you don’t have an Analytics account, click the Continue button to sign up for one.
• If you already have an Analytics account, click I already have a Google Analytics account.
• From the Existing Google Analytics Account drop-down list, select the name of the Analytics account you’d like to link to.
• Keep the checkboxes selected on this page, unless you’re sure you’d like to disable auto-tagging and cost data imports.
• Click Link Account.

After linking your adwords to analytics, it will be more easier for you on analyzing your data (impressions & conversions). You should be able to see your account like the image below;

See Google Analytics Help for more info.