Ad-Sense and Ad-Words looks like similar words and even we may feel sometimes that purpose of both is same. But they are entirely different.
Ad-Words: Its a Google way of Advertising about your Business by displaying your add in the Sponsored link to increase the Traffic towards your Website(Business).
For E.g. Let's say you have opened a new Cloth Shop and you obviously would advertise to let people know about it. But as we know in today's World you also need to advertise On-line apart from some Physical Paper Pamphlets or media advertisements. So for that, you create a Website also, but how people will know such Website or Business has started, and then Google Ad-Words comes into picture, whose job is to increase your business further by Advertising on-line. So you sign up with them, choose some catchy template which will be displayed on the search sites or any other relevant sites that will attract Customers. Where that advertisements will be displayed is Google's Job. Your Job is to pay Google the advertising amount or as per the number of valid Customers it sends to your Website.
Ad-Sense: Now After the business part is taken care of , Ad-Sense comes into picture. Its a concept where some other person having goggle Ad-Sense Account takes your adds to be displayed on their site. Now if some one (could be a potential Customer) clicks on the Advertisement and that takes them to your site could be profitable for you and that's how gradually people will come to know about your new Business. Since some one, in a way, promoting your Business at his website, Google pays him some % of the amount which they are getting from you and that's how Ad-Sense works.
We'll it sound pretty cool , but there are many terms and conditions related to that (we already know they Exist), so study them properly before starting and be Genuine. :) :)..
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