It's been a while since I used it, but basically you agree to have google ads placed on your blog.
I had it on my blogger site, but not my personally owned domain. In my line of business (home based) - because of my content, google was placing ads on my site that I KNOW are out-right scams. Not a good thing for my blog or readers.
I say this because when building a blog for any reason, your readers want to know that your info is credible and some readers honestly do not know about adwords (I know, that's hard to imagine, but it is true) .... So when they click through on one of the ads, it is as though YOU personally have recommended that link. Personally I chose credibility over a couple of pennies for a click through.
I abandoned the blogger site as far as actively writing there and only ping tweets to it now. However, in the two months adsense was on the site and I was active, I think my revenue was somewhere around $12 for the two month period... not enough for a pay out of any kind.
Though I am not involved in the adsense program anymore, I was recently told by a blogger 'expert' better to have the ads on the right hand side than at the top or left (if you have the choice). The theory was that serious readers do not like scrolling down past ads or scan over from the left to get to the meat of your blog ... makes sense to me.
~Jennifer