Affiliate marketing is defined as: -
A method of promoting
web businesses (merchants/advertisers) in which an
affiliate (publisher) is rewarded for every visitor,
subscriber, customer, and/or sale provided through his/her efforts.
More info can be found here: -
http://en.wikipedia.org/wiki/Affiliate_marketing
To start with there are a number of networks that have clients i.e. vendors. Many of these networks are listed in this
forum, there are other smaller networks or independant programs available and these are just a few and the list increases to grow monthly.
These networks deal with customers; these can be small independent shops right through to large global retailers. In essence these affiliate networks act a middle men who manage a companies affiliate marketing activities. The affiliate (Like me and probably you if not now but in the future

) deals with these networks and sign up to programs that may interest us or relate to our website. This can be anything from cars through to everyday items such as printer ink to cds.
Once you have joined and been accepted as an affiliate for a particular program you will have access to banners, text links or other advertising mediums that can be added to your websites, email newletters or anything else as permitted by the networks.
For each sale made through your unique link you will recieve a commission or fixed referral fee. This can vary between a few cents to many hundreds of dollars depending on what you are pushing and how well you are doing at it.
This in a nutshell is the essence of affiliate marketing - It can be much more complicated than this but from my own experience once you earn your first dollar it's addictive and you learn as you go along!