
(Note: I do not give you complete reasons why you should choose every option, I just list every option you should do. If you follow the steps, your blog should make some money. Perhaps $1 a day. As it grows it will make more money, and from there you can create multiple blogs and make even more money! Just remember post frequently or your blog will die out and you will make nothing)
1) Build a Blog
To build your free blog, go to www.blogger.com and register. Blogger.com is now owned by google, and that is why google allows it’s users to display ads easy with it, because there making more money, by having you sign up with their free blogs. It’s a win-win situation!
Once you create your blog, you need to think of a niche. For example, lets saying were making a blog about losing weight, first of, you need to make the domain name something similar to losing weight something such as “lose-weight-nowblog.blogger.com” this way your domain name is relevant to your content.
2) Getting Started
Now that you have passed the registration process, choose a template that fits your blog well. One that is simple but top the point. Now you have to twinkle to the settings to maximize your traffic. Do the following.
Basic Settings: Choose the keywords you want your blog to be noticed for. This will help you with google ranking your page and generating your blog traffic. Give a description about your blog in the description field, make sure that you include some keywords your blog uses in the description field. Where it says “Add Blog to Listing” hit yes.
Publishing Settings: Set the option to yes, this allows crawlers to find your site much faster and also shows your blog on weblogs every time you make a new post.
Formatting Settings: You can edit how many posts you want on a page and other stuff. I make 5-7 posts on a page, however this doesn’t effect your traffic much. Twinkle with the settings to the way you like it. Smaller pages get indexed faster by the way, so keep that into consideration
Comments Settings: This is another optional option, I allow users to post comments. Don’t show comments in a popup window, because the popup window is in javascript and does not get indexed.
Archiving Settings: If you post everyday, set your archiving to daily, if you post every few days or weeks, set it to weekly. Also enable post pages.
Site Feed Settings: Enable site feed. If you have short posts, enable short feed, if you have very long posts enable the other option
3) Adding Adsense
If you haven`t already chosen template do it. Now you need to find layout(at template section). You will see such thing like "Add a page Element". There will be command named Adsense, simply click on it choose your type, size.
4) Getting Traffic to your blog
Now that you have your blog up and running, you need to get traffic. You can get free easy traffic in many ways.
The first thing you want to do is make good posts every single day for a while so google indexes your page. This is the first step to getting quality traffic. Make your post contains keywords of your blog, and bold the keywords as well. Another easy way to get traffic is post your blog into blog directories. Most blog directories are free and give you some easy traffic. To get blog directories just do a simple google search on it, I’m sure you’ll find hundreds of free directories. Do about 10 a day.
Note: For blog directories a lot of times you need to add your RSS Feed. Your RSS Feed is thing that tells people who submit to your feed when you update your blog. Your RSS feed will be http://www.yourblog.blogger.com/atom.xml. Another way to get more traffic is to get link partners. With link Partners you improve your PR which increases your general traffic income, and also you receive hits from your link partners. A good site to get link partners is http://www.linkmarket.net
Also, put your site in forum signatures, in email signatures, tell your friends, etc. This also gives you some targeted traffic, its mostly quality, not quantity for this though.
Other useful information:

1. Pay per click - this is the common way to earn which is you earn every time a visitor clicks on your ads
2. Pay per impression - an advertiser can specifically target your site and show ads where you earn via cost per 1,000 impression (e.g. you earn every time someone sees your ad, even though they don't click on it)
3. Referral - you can also earn if you refer a visitor to use Adsense or Adwords, download the Google toolbar, etc.
Adsense also have a Search for Adsense program where you can put the Google search box in your site -- but you don't get paid when someone uses the box to search, but only when someone clicks on the ads in the search results
Adsense also has the Video Units, where you can show preselected YouTube videos on your site, and you earn only when someone clicks on the ads shown at the top of the videos (not when the videos are played or watched)
Adsense also has a Mobile Adsense program if you have a mobile website
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