Google has revolutionized the business of advertising on the Internet by providing new tools and data that allow thoughtful users to objectively plan and evaluate results. Smith's "Grow Your Business with Google AdWords" provides an excellent overview to help those with new businesses get started, and existing Internet advertisers to improve. Smith begins by pointing out the difference between search engine optimization and search advertising. The former optimizes a site (eg. [...]) so that it is found and highly rated by Google and other search engines, and the latter places ads alongside selected search results (eg. tool rentals). This book is about the latter.
Earlier search engines crammed their home pages with links, features, and third-party ads - that was how they made their money. Google's, however, is bare. Google always ranks information-providing sites (eg. Wikipedia) higher than commercial sites. Google makes most of its money through AdWords.
Google's 'PageRank" favors 'inbound links' - sites linking to yours, thus giving you 'authority' status per Google, as long as you don't reciprocate. (Previoiusly this was a means of abusing evaluations to raise ranking results.) Product-vending sites are not likely to be highly linked to.
In general, the more you bid for a customer's click on your ad, the higher up on the list your ad appears; how effective your ad is and its relevance (eg. location) are also determinants. If your ad doesn't receive at least one click-through for every 200 or so impressions, Google will decrease it's ranking, possibly even disable it. Conversely, an effective ad will gradually cost less to maintain the same position. (The bad news is that competitors will notice your success and copy you - it's a constant challenge.)
The Google Search Network is a number of Google partners (eg. [...]) that can be used to expand to non-Google users without having to repeat all the setup work. Author Smith recommends starting out simple, with just Google. Then there's the Google Content Network - hundreds of thousands of quality websites, news pages and blogs (eg. [...], New York Times) that partner with Google to display targeted AdWords ads.The author recommends careful choice of these sites to use.
Google will suggest a recommended daily ad budget for starting out, based on historic experience for ads using those keywords in the past. It also recommends bid levels. Another Google option is using 'standard spread' (ads spread evenly throughout the day), or accelerated (show ads as quickly as possible). Other options include location, maximum bid, how billed (per click, per sale), offering different bids at different times of the day, rotating among different test ads to evaluate them compared to each other (this would include playing with price). Negative keywords allow specifying when you don't want your ad shown - eg. when 'free' is one of the search terms. Quoting a price can also quickly screen out those not likely to become customers. Smith also recommends documenting everything, and only changing one element at a time so you can truly understand what is causing what.