Quite simply, an Affiliate Program is a marketing agreement between you and another web site that offers certain products and services. The other web site, which is called the "merchant" in the business, pays you a commission based on certain marketing and advertising services you render for them. These services can be as simple or extravagant as you want, based on the complexity you think your site can handle and the changes you want to implement.

If you enter such an agreement with a merchant, your web site then becomes referred to as a "publisher". As a publisher, one of the simplest and easiest ways to earn extra revenue is to enter a per-click and per-ad commission agreement with your merchant. In the per click basis, you simply add links to your web site that redirect people to your merchant's web site. For every person thus redirected, you earn a small fee. The per ad basis means that you actually set up small graphic, flash animation, or even video streaming ads on your web site on behalf of the client. Per-ad affiliate programs are paid on a constant basis, usually per month of ad space.

Aside from these two, there are also "loyalty" and "rebate" programs set up by some merchants that give you electronic coupons and the ability to help people register on line for a discount program from the merchant. In these cases, payment is made in tow ways: one, for every coupon or sign up, you get a commission. Two, every time someone buys a product from the merchant using coupons they got from you or from a discount program you offered, you also get a commission from the products bought.

A third type of affiliate program is perfect for web masters who run personal web sites with their own blog pages, member forums, write their own article content, or even publish their own periodic e-magazines. In an offshoot of the pay per click and pay per ad system, webmasters who run personal web sites can get paid for promoting the products through review articles, a slot on their discussion forums, blogs, as well as through the regular option of adding a link that you get paid for on a per click basis. This option actually appeals to a lot of merchants who feel they are better able to reach customers directly through personal web sites as opposed to "commercialized" methods.

Taking affiliate marketing a step up, you can also choose to become an etailer, short for electronic retailer. As an etailer for your merchant, you become a licensed sales representative that gets relatively larger commissions from direct product sales. This tends to make more money for webmasters who are also aggressive at sales, but in general is too much of a bother for webmasters who prefer to let their web sites run on "autopilot". If direct action is your thing, however, you might want to consider this form of affiliate program.

Lastly, there is also multi level affiliate marketing. This works like the classic multi level marketing programs where sales representatives of a company get commissions not only for direct sales that they personally make, but can also recruit other sales representatives on behalf of the company. They then get extra commissions both from these referrals and the actual sales made by the referrals. On a diminishing returns basis, they can even earn profit from the direct sales of the referrals made by their referrals down the line of the hierarchy. In affiliate marketing, this is done almost exactly the same way, except that instead of sales reps, the web masters find other interested web masters and bring them in as publishers for the merchant. This tends to be a very powerful and self sustaining marketing tool that benefits it's publishers and the merchant IF the network of publishers can be made to rapidly and steadily expand.

Last is the "hybrid" affiliate program. This employs a fusion of most of the methods outlined above, and this can prove to be the most profitable for a hard working web master. It will probably entail the most effort, but can also bring in the largest revenues through multiple, overlapping programs.