exmoorbeast - 10:35 am on Jun 9, 2010 (gmt 0)
Try searching your query on Google, there are loads of videos by Google on You Tube - some really amazing ones about the ad aution.
I got this from a search:
Determining Click Cost:
Actual CPC = (AdRank to beat/Quality Score of Advertiser) + $.01
Each advertiser only pays the minimum amount required to maintain his position.
An advertiser's actual CPC is determined by dividing the AdRank to beat (the AdRank of the competitor below them) by their own Quality Score plus one penny. The lowest positioned ad will only pay the minimum price required by Google to show on the page.
Hope that helps. If you are at this point now, try reading blogs like Click Equations ROI Revolution etc.