The idea is simple, they use their searching technology to decide which ads make sense for your site and inserts them into the page (using the standard graphics advertising practice).
If somebody clicks on it, you get $0.50.
It's an interesting idea for users and web sites both, since the users will see advertising that is more appropriate for the content at the time, and the web sites don't have to plumb the depths to find organizations that are interested in advertising on them.
One question that I have is what happens when you have a commercial site? It would seem that if your competitor advertises with Google, they will likely show up on your site.