A Product Listing Ad is a paid search ad that includes richer product information like a product image, price and merchant name. These ads do not require additional keywords or ad text and they appear whenever a user enters a search query relevant to a product in your Google Merchant Center account. Google will automatically show the most relevant products along with the associated image, price and product name taken from your product data feed file from your Merchant Center account.
Product Listing Ads are only shown on Google.com and some of its search partners. These ads are usually separated from standard text ads and are next to other Product Listing Ads. They are ranked based on a combination of your CPC bid, the relevance of your products to the search query as well as the historical performance of your ads. The more relevant your products are to a search query, the more likely your ads are to appear in a higher rank that your competitors.
Product Listing Ads are charged on a cost-per-click (CPC) basis and you can define your maximum CPC bid just like a regular AdWords keyword or placement. Below is a screen shot of some examples of Product Listing Ads on Google.com.
Please note that you must have a Google Merchant Center account to use Product Listing Ads and it must be linked to your AdWords account. In addition, Google recommends that the products in your Merchant Center account are up-to-date and properly optimized.