Advertisers pay Google, which then pays publishers (people who own websites) to have the ads displayed on their sites. This display ad network was largely established when Google bought DoubleClick, and should not be confused with Google's search ads (where ads are displayed in Google's own search results).
But don't you need certain volume of visits for Google to want to display their ads in your site? What stops me from creating 300 random sites and putting google ads in them and just let them sit?
No minimum traffic, but they have a minimum payment threshold of $100. I have some legacy adsense ads, mostly on an old abandoned blog, which last sent me a payment three years ago. My current balance is $14.82. One of these days, I'll get around to doing what's necessary to resume serving the ads on a wiki I run which used to generate around $5–10 a month, but I'm in no rush.
