That is a very broad topic and best advise is to buy a book to educate yourself. I use The definitive Guide to Adwords by Perry Marshall but there are others for you to consider. Once you know the basics it is all about trial and error. Good Luck
I would recommend that you see AdSense help, which can be found by entering "AdSense help" into Google Search, and selecting the first result.
best ways to manage adwords: 1) Reporting Centre 2) Analytics 3) Excel 4) Editor 5) UI 6) In using all of the above I'd receommend not using any software, if you want really good results put the time / effort in to learn adwords and manually manage it all
I prefer only the above. And as it was recommended that to "put the time / effort and manually manage it "