An affiliate program is best likened to a “finders fee” when a customer and a product seller are put in contact and a sale results.
On the internet, various product vendors include affiliate programs as an incentive for others on the internet to mention or promote their products. The connection is made via an affiliate link, which sends the potential customer to the vendor’s site to purchase the product. That affiliate link allows the vendor to know who it was (the affiliate) who referred that customer. The seller then pays a commission – anywhere between a few percent to 50% or even more of the purchase price – to the referrer. The actual price paid by the customer is not affected.
For example, on Ask Leo!, I might elect to recommend a product. If I find out that the product has an affiliate program, then rather than simply linking to the product’s web site, I might use a special link – an affiliate link – that tells the seller that the person clicking the link came from Ask Leo!. If that person purchases the product, I would get a portion of the purchase price as a commission.
As you might imagine, affiliate programs and affiliate marketing can be abused by those promoting products for the amount of potential commission rather than on their merit. On the other hand, when used ethically (as I believe I do), affiliate income can become an important source of revenue to pay for the operation of the site.
The full Ask Leo! affiliate disclosure can be read here: Product Reviews, Recommendations and Affiliate Links Disclosure.