AdWords

AdWord is the Cost Per Click text advertising used by Google. Users use AdWord to put the keywords into their ads, and the ads will be located in the right top of the Google search result page in order to drive traffic.

CPC
The cost-per-click(CPC) is the amount you pay each time a user clicks on your ad. You cost-per-click(CPC) bid is one of the factors that effects the position of an ad on search and content page. A higher CPC bid help you improve your ad's position, but the ads are not ranked solely by their bid.

Maximum Cost-per-Click (Maximum CPC)

Your maximum cost-per-click (CPC) is the highest amount that you are willing to pay for a click on your ad.

Daily Budget
Your daily budget is the amount that you're willing to spend on a specific AdWords campaign each day.

What affect the ads' ranking?
The ranking is based on a combination of the matched keyword's CPC bid and Quality Score. Quality Score is determined by the keyword's clickthrough rate (CTR) on Google, relevance of ad text, historical keyword performance, landing page, and other relevancy factors.

If your ads have high position of ranking, it's easier for users to see your ads. Therefore, your ads will become helpful for increasing the website traffic.

learn more from the site:http://adwords.google.com/support/bin/topic.py?hl=en&topic=70