Let’s cover some basics. Google makes money by selling ads on a pay-per-click (PPC) basis, which has become the industry standard for online advertising. Via Google AdWords, A business can create an ad which gets displayed on Google. If a user clicks on that ad during a search, Google charges the business an agreed upon price for that click.
PPC ads are available in different forms: text ads and display ads.
Text ads show up on Google search results based on the keywords and phrases you choose. They are marked “Ad” if you take a closer look and they tend to show up before the organic results.
Display ads can show up on other websites based on your searches browsing history. For example, if you have shopped cars online, Google might display an ad for cars while you browse the morning news on your regular news site. That’s because your news website has contracted with Google to display these ads via a platform called Google AdSense. In return, they will receive payments from Google based on the PPC performance of the display ads.
In short, AdWords is for businesses seeking to advertise. AdSense is for websites or blog owners seeking to monetize their space by allowing AdWords ads to appear next to their content.