How Advertising on Google Works

Whenever you search for something on Google you will see something similar to the following picture:

Notice I have highlighted results in two different colors, red and green.

The green highlighted web pages are Google's organic search results. These are the pages which are displayed for free and are the web pages that most people click on when searching for something.

The red highlighted web pages are the Google AdWords paid advertisements. These advertisements are always shown to the right of the search results and are sometimes shown above the search results.The AdWords advertisements are Pay Per Click (PPC), which means that the owner of that advertisement pays Google a few cents every time someone clicks on their ad. The red sections are where your advertisement will appear when you sign up for Google AdWords.

I recommend watching this video by Google to get more information about where your advertisements are displayed:
Google Video - Where are My Ads Displayed