AdWords is the premier advertising system run by one of the world's largest websites, Google. A major source of revenue for the company, AdWords allows advertisers to offer links to their own sites. Using related keyword searches, simple site descriptions, and a specialized section of page space on Google sites. You can read much more here: http://adwords.google.com/support/aw/bin/static.py?hl=en&page=examstudy.cs
Simply put, Adwords is a form of pay per click advertisement which is one of the sources of getting website traffic. It is the pay per click ad type belonging to Google as opposed to Yahoo search marketing for example which belongs to Yahoo and is another form of pay per click ad. Advertisers are premium featured on the first few pages for a fee alongside and even sometimes ahead of top ranking websites for the organic natural searches.