Pay-per-click is an Internet advertising model used to direct traffic to your website, the advertisers pay the hosting service when their ad is clicked. With search engines, advertisers choose keyword phrases relevant to their target market. Content sites commonly charge a fixed price per click rather than use a bidding system.
Cost-per-click on the other hand is the sum paid by an advertiser to search engines and other Internet publishers for clicks on their ads, which directs visitors to the advertiser's websites.
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, pay-per-click implements an affiliate model, that provides purchase opportunities wherever people may be surfing the web. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites out there. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model: If an affiliate does not generate sales, the merchant will not be charged. Variations include banner exchange, pay-per-click, revenue sharing programs, etc...
Websites that use PPC ads will display an advertisement when a keyword query matches an advertiser's keyword list, or when a content site displays similar content. Such advertisements are called sponsored links or sponsored ads, and appear above or below organic results on search engine results page, or anywhere a web developer chooses to place it.
Pay-per-click providers include: Google AdWords, Yahoo! Search Marketing, and Microsoft adCenter these are the three largest network operators, and all three operate under a bid-based model. Cost per click (CPC) varies depending on the search engine and the level of competition for particular keywords.
The PPC advertising model is open to abuse through fraud, although Google and others have implemented automated systems to guard against abusive clicks by competitors or corrupt web developers. They often check the sites to make sure no suspicious activities are going on. And they will not hesitate to shutdown an account if fraud is found.