Here's a good link. Will explain it in detail. http://money.howstuffworks.com/affiliate-program.htm Hope this helps.
Briefly put: seller gives certain percentage to affiliate for each sale. Basically it can help seller get more sales, but also benefits affiliate since he doesn't have to create a product - just to sell it to earn money. For definitions, check out wikipedia.
Also you can find several ongoing discussion on affiliate marketing in forum like this; http://www.associateprograms.com/discus/index.php
The affiliate progam section will give you a good general idea of what affiliate programs are, how to earn from them, and what sorts there are.