Adwords vs Adsense: What Is The Difference?

A lot of people tend to get confused with Adwords and Adsense and often use the words interchangeably. It's not surprising, considering both terms are so remarkably similar in the way they sound, as well what they stand for. They are actually opposites, though.
Google Adwords and Google Adsense are essentially two different sides of the same coin. Adwords refers to the ad-selling system run by Google, whereas Adsense is the ad-publishing program.

Google Adwords is the system whereby people pay money to place their advertisements on Google and / or on any individual website. All the advertiser needs to do is to create an account, insert the desired advertisement and choose from several options as to the maximum amount he would be willing to pay per click on the inserted ad. After the advertiser's credit card is approved, the advertisement goes out live on the web and every time any internet surfer clicks on the advertisement, Google records it. Over a period of time, when the amount reaches a certain specified level, Google will then charge your credit card. Adwords is a form of pay-per-click advertising.

Google Adsense refers to the ad-publishing system that displays Google Adwords in websites not owned by Google. It is the system where website owners sign up to get those advertisements placed on their site. With Google Adsense, website owners who wish to place ads on their site, have to first set up an account with Google. Once the site is approved, they can then display advertisements from the enormous database of Google Adwords. Google then pays the owner of the site displaying the ads. Google pays Adsense publishers based on a per click model - the percentage paid per click is secret, but high traffic websites can create a sizable revenue stream from Google Adsense.