PPC is the act of paying a search engine to temporarily put your listing in the top 3 positions for a particular search query. You pay can set a spending limit, and pay the Search engine on a per click basis.
Every-time you search for “Books” and click on one of the top three links a business just paid Google to be in that top position. Some search queries are more valuable than others such as someone searching for “buy Books” may be willing to pay as much as $10 per click to Google for a potential sale. Another search query such as “create an art web site” is more specific and less lucrative, thus would be less valuable and may bid for 20 cents per click.
All of the prices are determined by an open market of bidding leaving the prices constantly changing. After creating an adwords account with Google on www.google.com/adwords you can research keywords that you think people would use to find your product or service. They also have a tool that allows you to see how many people searched for a particular keyword or phrase last month. Since other people are also bidding for particular searches, the ones that are more competitive will naturally cost more money to win. You can also set a spending limit for yourself, for example tell Google you would only like to spend $100 at 50 cents a click, once you get 200 clicks your link is removed, and your campaign ended.
You may have noticed after making a Google search that the top 3 links are highlighted these are the PPC links, and all other links below it are naturally ranked. This is why many people will always start clicking on the 4th link which is actuality the highest natually ranked website for that search. Google has recently done away with the difference in appearance between PPC and natural, but the same underlying concept and bid system is still there.
Creating a PPC campaign is simple to start but very hard to master. This subject is a little bit too indepth for this web site. If you are actaully interested in going on a campaign I would suggest picking up a book on this particular subject. Creating a campaign without having any knowledge in this area would be a foolish mistake, and could become very costly.