The ad platform is called “Promoted Tweets,” beginning with promoted tweets within Twitter Search results. Please see image for Starbucks example or search “starbucks” or “coffee” in Twitter.

The platform will allow advertisers to insert themselves into the Twitter stream in order to rise above the noise. It will start with search results, but later on will enter both Twitter.com streams and third-party apps such as TweetDeck and Tweetie (acquired by Twitter last week). Only one promoted ad will be displayed per search.
Initial customers of the platform include Virgin America, Bravo, and Starbucks. Advertisers will bid on keywords based on a CPM basis initially, but later on Twitter intends to launch a “resonance score” metric that will judge the reach and impact individual sponsored tweets have, based on favourites, retweets, and views.

This is a very similar model to the current Paid for Search model, where it will take into account the cost an advertiser is willing to pay, and the relevancy of the ad (click through rate), to determine whose ad is served. Google sold their inventory on a CPM basis when they first launched their Paid for Search offering, but really began to grow when they moved over to a CPC buying metric.

If the offer becomes popular among advertisers, which given Twitter’s hype and reach over the last 12 months, undoubtedly will, only having one promoted tweet per Twitter search will cause bidding wars between advertisers in a similar vertical for that coveted advertising spot. Therefore driving costs up and generating some long awaited revenue for Twitter.

Source: http://mashable.com/2010/04/13/twitter-promoted-tweets/