The sheer size of the web created a need for web search tools - so search engines were created to help web surfers find what they were looking for.  

Search results were created by "crawling" sites and indexing the content. The final results were determined by the Search Engine's algorithms, using certain aspects of a web page to determine who got listed on top of the search results.  These are called organic search results. 

Search Engines like Google needed to make a profit, so they began selling keyword-based ads to complement their organic results. Purchasing these ads are generally referred to as Pay Per Click advertising. The two largest search engines, Google and Bing, both provide Pay-Per-Click advertising called "Google Adwords" and "Bing Ads", respectively. 

The process of placing ads is done by setting a budget and bidding on certain terms or "keywords". 

Why does it matter? 

Since around 90% or more of purchasing decisions are made with information found online,  
Pay-Per-Click advertising is a great way to reach active consumers.  
Even with a small budget you can get started creating ad campaigns, and it's a good addition to your overall marketing strategy. It also helps to overcome poor organic search results your website may have.