How is AdWords different from AdSense?

Dear Nisha, Nice to see your awareness about current tech-innovations...
you can find the thorough mechanism of AdWords and Adsense on
http://www.vaughns-1-pagers.com/internet/adwords-adsense-diagram.htm
Adwords is benificial for advertisers but not for google whereas Adsense is opposite 
to Adwords in monetory terms.

Adwords:
With Google AdWords, you can create and run ads for your business, quickly and simply. Run your ads on Google and our advertising network -- no matter what your budget, you'll only pay when people click your ads. Just visit www.adwords.google.com to get started.

AdWords ads are displayed along with search results when someone searches Google using one of your keywords. Ads appear under 'Sponsored links' in the side column of a search page, and may also appear in additional positions above the free search results. That way, you'll be advertising to an audience that's already interested in your business. You can also choose to display your ads on Display Network sites in the growing Google Network. And, you can choose the exact Display Network placements where you'd like your ad to appear, or you can let contextual targeting match your keywords to content.

You can choose from a variety of ad formats, including text, image, and video ads, and easily track your ad performance using the reports available in your account.

There's no minimum monthly charge with AdWords -- just a nominal activation fee. Learn more about the cost of advertising with Google AdWords.

To find out more about Google AdWords or to begin creating your ads, visit the AdWords home page.

If you'd like to start advertising and you're looking for an agency or individual to help, you might consider using a Google Advertising Professional who has been certified by Google. Learn more about Google Advertising Professionals or visit Google Professionals Search to locate a list of professionals to suit your requirements.

AdSense:
Google AdSense is a free, simple way for website publishers of all sizes to earn money by displaying targeted Google ads on their websites. AdSense also lets you provide Google search to your site users, while earning money by displaying Google ads on the search results pages.

http://www.v7n.com/forums/google-forum/77852-adwords-vs-adsense-what-difference.html