How do people earn money from YouTube?

1. By getting sponsorship directly from a brand and advertising their products or services through proper placement in your video. For instance, there is a channel called AIB in India that advertises Snapdeal by placing Snapdeal in their videos.

2. By monetising your YouTube videos. This is the way out for a 'normal' YouTuber who doesn't have the leverage to directly contact brands who will pay you for promoting them. Once you enable monetisation on your YouTube videos (this means creating a new Adsense account or linking an existing account with YouTube - you can get all the details on the dashboard of your channel or you can just Google YouTube monetisation), you can enable three kinds of ads on your videos -

A) Ads that will appear during the time the video is played. These will be banner ads and you will earn if people click on these banners.

B) Skippable Video ads that will play before or during the video is played. The viewer is allowed to skip the ad after a few seconds. You will earn if the viewer watches the video for at least 30 seconds. You earn a fixed amount for every 1000 ad views.

C) Compulsory Video ads which are just like Skippable video ads except that they cannot be skipped. The viewer has to view the ad in order to see the video. The earning mechanism is same as that of Skippable ads.

So, these were the ways in which a 'normal' YouTuber can earn money. However, the earning potential will be limited as you need more and more views to earn more. You will get more views when you consistently create quality content and market your content well.