What is an Affiliate Program?
An affiliate program allows you to have hundreds, if not thousands, of Web sites and webmasters selling your product or service for you. You reward the affiliate Web sites and affiliate Webmasters by paying them on a per-click, per-lead or per-sale basis.
Most affiliate programs pay on a per-sale basis, meaning that you would pay a certain commission or percentage for each referred sale. In other words until a sale is made, you owe nothing.
What benefits can I get from having my own affiliate program?
Real Increase in Web site traffic
Real Increase in sales
Cost-effective advertising & marketing
Higher positions on search engines because of higher link popularity (but only if you host the software on your own site)
Starting an affiliate program is one of the best ways to get targeted qualified traffic to your site.
However what is even more important than this is that search engines use link popularity as a major factor in your site ranking. A high link popularity not only depends on the number of incoming links to your site, but also whether those links are relevant.
An affiliate would not have signed up if they did not think they could get people to click on their referral links to your site, from which they hope to earn a commission, so it is likely that their website visitors are already looking for the information / product / service you provide and their links will be VERY relevant.
The important thing with respect to the software you choose however is that the links on your affiliate sites need to have the referral links pointing to your own website domain, i.e: www.yourwebsite.com. Most of the hosted solutions use their own domain and the affiliate links (e.g. http://www.some3rdpartysite.com/affiliateid=12315?v=234) are set up to redirect to your domain, which will not help with your link popularity.