Adsense is ads that show up when you go to websites that have 'Ads by Google'. This is Adsense for content. If you have a website or a blog you can put adsense on the pages. What this does is, when one of your visitors clicks on an ad you make money.
Adwords are paid avertisements. Adwords are the same ads that you see on sites that have 'Ads by Google' or when you do a search on Google and see 'Sponsored Links' at the top or right side of the page.
Adwords costs you money. You are paying for your ad. You don't have to pay unless someone clicks on one of your ads.