Affiliate Marketing is probably the most popular method of performance-based advertising and can also be considered as the most "authentic" type of it. Affiliate Marketing describes the relationship between the Merchant (or Advertiser) and the Publisher (or Affiliate), where the second promotes visitors to a selected website of the first and gets payed only when guests make an agreed action (like a purchase).
The Advertiser can actually be any company that maintains a website, where visitors can make some kind of transaction. Usually this transaction is a completed purchase if par example the Advertiser has an online store. But the transaction doesn't always have to involve money transfer. The term can also describe other kinds of actions, such as filling out an order form, the registration of a visitor to the selected website, or receiving a users subscription to a newsletter.
The Affiliate can be anyone (individual or company) who maintains a web page from which he can send visitors through links. Affiliate may also be someone who sends visitors to the advertiser, through a Pay per Click Campaign he has created in search engines. Affiliate does this in order to be paid by the advertiser an agreed fee or commission, if the visitor he sent, makes the desired transaction.