Google gives you a choice between Ad Unit or Link Unit. If you choose Ad Unit, you can decide if you would like to allow image and text ads (so that Google can either rotate a relevant image or a relevant text ad on the ad space you allocate), or you can specify if you want only image ads or only text ads.
The (clickable) image here shows you a quick visual difference between a Ad Unit and a Link Unit.
Apart from the visual difference, a Link Unit displays a list of relevant topics. When users click a topic, they are brought to a page of related ads. In other words, with Link Units, it does not display a specific advertisement from a single advertiser.
You do not get paid if a user click on a topic in the Link Ad. You only get paid if the user later clicks on a specific ad on the resultant page of related ads.
Ad Units will display specific advertisements from specific advertisers - and this can be either in textual form only, as image ads only, or a rotational combination of either whenever a page is viewed.
Q. So why would you use Link Units?
Additionally, if you are placing a lot of Google ads on any of your pages (making sure that it will work with your page layout AND will be of benefit to your users), then you might choose to include some link units.
According to Google AdSense policies,:
You will almost certainly be employing some Ad Units. As you saw above, Ad Units are offered to you in 3 variations - images only, text only, or allow Google to randomly drive either contextual image or text ads into the ad "shells" you set up.
Here is a quick visual example between a TEXT Ad Unit vs. an IMAGE Ad Unit. I am only showing one size/format but Google does offer Ad Units in multiple sizes. (We will come to that later).
The default (and Google recommended) setting for Ad Units is to choose "Text and Image ads".
"By choosing to display image ads in addition to text ads, you can help make sure that you'll have all available advertisers bidding to appear on your site. Both text and image ads will compete in the same auction to be displayed on your pages and we'll automatically display the ad(s) that will be most effective for you on your site."
You will get paid each time a user clicks on an Ad Unit displayed on your web pages.
Then let's proceed to the next step in AdSense setup: Choose Ad Formats and Colors