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Basically without adwords there would be no adsense. (okay now the hardcore web guys out there may find this answer simplistic but it's a good question and at one point we probably all asked it!). Adwords are the adverts that you see at the top of each page on google and the ads running down the right handside of each page. These adwords advertiser are prepared to pay from a few cents per click to several dollars per click.
The adsense revenue that you generate as a publisher is roughly 50% of what the adwords advertiser pays google. You can display adsense ads on any website (within reason - death, hate, porn, terrorism are obviously a no-no!) - the adsense ads that appear on your site are contextual e.g. they are linked directly to the main keywords on your webpage. The skill is in not making them look like ads at all thus increasing the chances of people clicking on them and making you revenue.
Not every site gets approved, but there are myths out there such as you have to have had you site running for 6+ months - this is just an urban myth! most sites get approved in less than 7 days. You can build a substantial job busting income from adsense with a little work. For more specifics please check out my signature. Hope this helps you and others new to adwords/adsense. Post freely we all have to start somewhere and any critics of this post should remember that!
Cheers
Dickie Boy
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