Google Adwords How are ads ranked ?

Most of the advertiser is worried about the position of their ads in Google Adwords.
So for newcomer :) how google is determining the position of the ad of the advertiser.

Keyword-targeted ads are ranked on search results and content pages based on their maximum cost-per-click (CPC) and Quality Score. (For the top positions above Google search results, Google uses the actual CPC.) The Quality Score is determined by the keyword's clickthrough rate (CTR), relevance of ad text, historical keyword performance, and other relevancy factors.

Ad Rank = CPC X Quality Score

Having relevant keywords and ad text, a high CPC, and a strong CTR will result in a higher position for your ad. Because this ranking system rewards well-targeted, relevant ads, you can't be locked out of the top position as you would be in a ranking system based solely on price.
For more info check this link
https://adwords.google.com/support/bin/answer.py?answer=6111&topic=7093

So next time while starting a PPC campaign on Google keep above theory in mind.

Cheers