How Ad Extension works in Google Adwords

Google Ad Extensions

For some advertisers, you might see that your ad's been enhanced with an automatic offer extension, a link that's labeled "View this ad's deal." We'll automatically add this link to your ad, allowing you to promote a deal that's mentioned in your ad text with a link to your landing page and giving customers another reason to click your ad.

When you create an ad, the AdWords system will scan the ad text to see if there are any terms associated with deals or special promotions. If your ad includes such terms, then we'll review your ad's text and destination URL to make sure you advertised deal is available on your landing page and complies with our policies. If your deal is eligible to appear, we'll show the "View this ad's deal" link below your ad text. Keep in mind that the link will take customers to the same landing page that's used in your ad's destination URL or keyword's destination URLs.

Eligible to appear with this feature

• Your campaign must be opted into the Google Search Network

• Your campaign must target desktop computers

• Your ad must be eligible to appear in one of the positions above Google search results

Cost of Deal Promotion Link ad

We'll charge you the same amount each time a customer clicks any link on your ad, regardless of whether the link clicked is the headline of your ad or the link promoting your deal.

How automatic offer extensions work with other ad extensions

If your ad is using an ad extension and your ad is also eligible to show automatic offer extensions, then we'll show that ad extension instead of automatic offer extensions. 

Ref 

http://www.youtube.com/watch?v=itc3cWLxkIg

http://support.google.com/adwords/answer/2375499?hl=en