Manual bidding for impressions lets you pay for each 1000 impressions your ad receives, unlike cost-per-click (CPC) bidding, where you pay only when your ad receives a click.
When you choose manual bidding for impressions, you set a maximum CPM bid. The maximum CPM bid is the most you're willing to pay for 1000 impressions on your ad, although it's rarely the amount actually paid. The AdWords discounter automatically reduces any winning CPM bid so that the amount charged is the minimum necessary to keep the ad's position on the page.
CPM ads are ranked for display according to their CPM bid, competing with other CPM ads and with CPC ads. A CPM ad always occupies the entire ad space, with either an image ad or other multimedia ad, or an expanded text ad. For this reason, you might wish to bid higher for CPM ads than you would for CPC ads.
