What does Affiliate Marketing exactly mean?

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I've been surfing and browsing for ways of earning some cash over the internet while i'm at home waiting to give birth to my baby, from some discussions, and from browsing over the internet i keep on hearing about affiliate marketing... with the banners and everything- and I just cant figure out how this stuff works.. Do you have to have a product to sell? or do you like act as an agent for a specific product? Im sure some of your are very well versed with this type of earning mechanism, Kindly explain to me please how does this work and what are the advantages of such.. Thank you so much in advance.