To make money with affiliate marketing, you need to become an affiliate of a site that sells a product or service by joining their affiliate program. You then add links on your website to their products, and when a visitor clicks the links and purchases a product, you get a percentage of the sale. Some affiliate offers are for leads rather than sales, so you can also make money by providing a lead to a business. Affiliates are often referred to as "publishers" and the sellers referred to as "advertisers".
Affiliate marketing can be considered an intermediate area between Adsense and e-commerce. With Adsense a visitor only needs to click an ad for you to get paid. With e-commerce a visitor needs to purchase a product from you, and you're responsible for fulfilling the order, collecting payment, and communication with your customer. While you'll make less on an affiliate sale commission, you won't have to deal with time and resource consuming customer service, or take the financial risks associated with carrying inventory, etc.
On my choosing a niche page, I began by explaining the importance of building a site on a topic you know or care a lot about. Many years ago, it was possible to throw up a quick site on nearly any topic, add affiliate links to your site, buy a few links to get your site to rank, and make a bunch of money. Today, as competition has increased and Google has made it more difficult to rank through "artificial" means, it's essential that your site is useful, interesting, and actually adds value above what already exists. The easiest way to accomplish that is to build a site on a topic you know well.
If your aim is to make money with affiliate marketing, you'll need to be sure there are affiliate offers for the subject of your site, that the offers are attractive, and that they're likely to convert. Beyond that, you need to have a plan for your site that ensures it adds value for users. By doing this, whether you choose to promote your site through SEO, PPC, or social networking, visitors will be engaged when they land on your site, and they'll spread the word. This is essential for the long term success of your site. If users aren't engaged, your site isn't likely to rank well due to both a lack of natural links and penalties from artificial links if you attempt to go that route. You also won't be able to make it with PPC, and no one will spread your site via social media.
In order to choose the right topic for your site, think about subjects you know a lot about or are interested in. Search for affiliate programs that match that topic, where the offers look good and likely to convert, and come up with a plan to add real value for users on your site.
Affiliate programs are available for most product you can think of, and there are several popular affiliate networks that can facilitate a relationship between yourself and an advertiser. Some of the most well known large networks are:
You can sign up with these networks for free, browse their advertisers, and apply for membership in advertiser affiliate programs. The down side of using a network is that they also get a cut, which comes out of your cut of course. But on the other hand they're somewhat less likely to "shave" your commissions, claiming less customers made a purchase than actually did, or purchased less. This can be a real problem with less trustworthy networks and individual advertisers. However, there are great relationships to be had with reputable companies and niches. In the travel and tourism niche there are plenty of solid programs offered by companies like:
As with Adsense, your affiliate offers should be well integrated with site and make sense for your visitors. If you've got a site about music, adding affiliate links for hotels isn't going to make sense unless it's related to a concert at a particular destination. The more an affiliate offer is related to the content of your site, the more interested a visitor is likely to be in it. Honest product reviews and information about the offer you're promoting will lead to much greater chances of a product purchase and affiliate commission for you.
Some affiliates will offer "feeds" of their products and descriptions. Don't use them. With Google's Panda, using content that is duplicated all over the web is a good way to get your site penalized. The more unique content you have on your site, the better. So if you are linking to a variety of products, make sure you write your own useful content about each of those products. Less is usually more these days. It's better to write comprehensive, useful information on a handful of products than thin duplicate descriptions for a ton of products.