Merchants basically the creator or owner of the products need help of others to have a wide reach to increase their sales.
A person who registers with the Merchant for doing the sales promotion at his cost is known as an "Affiliate". But please understand that as an Affiliate you DO NOT TAKE the physical product in your stock.
If the Affiliate is able to arrange a customer to purchase a product of the Merchant by means of Affiliate's initiative like mail from Affiliate/advertisement of Affiliate etc.,the Affiliate gets his Commission. Internet has simplified the whole thing.
Some of the Merchants give commission even if the customer referred by the Affiliate by above means do a registration or take some action like filling-up some forms. The commission policy varies from Merchant to Merchant.
Having Affiliates and  providing them the sales promotion tools like banners, text links etc., the Merchants can focus into the development of new products.