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I'm curious about the same thing. I also read on another blog that the owner charged them by how many clicks the link received and I was wondering how you could find out that information, because that seems like a fair way of doing things.
I do paid posts on my blog, but making sure they are relevant. I do some for PayU2Blog, that arent related to my readers, but those posts are able to be hidden in an archive and are not marked as paid posts. I made enough last year to pay for our move when we bought a new house, new TV and paint for my house. I really enjoy doing the paid posts!
I host paid advertising on my website [blog is not good enough - its very new].
The charges vary by banner size, and start at $20 per month [also includes a free sponsor page, which is something my advertisers love]. I provide real time stats and auto-emailed reporting. My guidelines are minimal, no hate stuff or porn.
I have done pay per clicks in the past [customer will pay me $25 bucks and we'll start the counter from there], but it's more profitable for me to do it by the time period;usually by the month.
I do have very good traffic, about 1000 visitors per day and 1M hits per month [very high search engine ranking]. Now this being said you'd think I'd be working with a media company or some type of professional organization to sell my inventory. Though I really enjoy selling to the small business owner and my dealings with the larger companies have usually left me with a bad taste in my mouth. For example, the last beauty company that I did a deal with was to pay me $10 per CPM. Not bad. But when it came time to pay up, they'd somehow come up with some ridiculously low number of pageviews, that was about 1/4 of what I was expecting to be paid. And I didn't have any recourse to argue the point, except my stats which I know are correct.
I have looked into this for my business, and I have found prices range from $5-$20 per month, depending on the size of the button and the traffic. PamperingBeki blog has a huge following (60,000+ hits per month) and she charges $10. I don't think you can go wrong within that range.
I don't see why you couldn't bill via Pay Pal every month just like any other business. You will just have to write up a contract.