have come across an odd website recently. It is a sales website for products in a niche market. However, when you click on the product it opens up in a new window at a different website. This implies to me that the original website owners earn commission on the sales from the other websites. I have never seen anything lik etis before and was wondering if it is something people think woudl earn a lot of money.

Sounds to me like you are right on track with your thinking that it is an affiliate site of some sort. I think the answer to your question about whether it would/does earn a lot of money depends on a lot of things: how they promote/position the site, where it ranks in the search engines, or if ppc advertising is cost effective what their traffic numbers and conversion rates look like. If they have identified a profitable niche, which even small ones can be profitable, sure they might be making a decent income, again, depending on the other factors I've mentioned and probably a few more others here can add.

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I am sure it is a type of affiliate where both of them will be making money/generating traffic. Win Win situation.