With affiliate marketing, you pay (or otherwise reward) an ‘affiliate’ a commission each time they provide you with a lead or sale. These affiliates are the publishers of other websites, often specialising in a field related to your business.
In the most basic example of this type of online marketing, a web user would click on a banner or link on an affiliates site, and would then be directed to a relevant page on your own site. The link contains an ID unique to that affiliate so that the visit can be tracked. If that click then resulted in a lead or sale, you would pay the affiliate. The amount you pay is pre-determined, and is often a percentage of the final sale price.
A range of online firms offer affiliate marketing solutions, such as TradeDoubler and Affiliate Future, and it can be good to start an affiliate programme with them as they run it for you. Generally this results in a lower volume of clicks than PPC or a good natural search listing, but the quality of the traffic received can be far higher.