Arbitrage is essentially a buy low sell high situation. You buy clicks from msn, ysm or adwords at $1 and hope to make $2,3,4,100 or whatever it happens to be.
Search arbitrage is more specific and deals with the cost imbalance across different ppc networks, the goal here is to buy a click at 10c at site a and run it through a click at 20c on site b or at whatever prices you find work. Its a problem for ppc affiliates who find it the best way to drive traffic but unfortunately made harder recently because of user experience. However PPC affiliates have been driving traffic this way for years. Expect it to mature into arbitrage 2.0 which ironically 'can' but not always does merge quality content with ads.
Arbitrage is nothing new itself, share trading, currency trading is all a form of arbi. Search arbitrage is just another strain of a broader older model and that also is evolving as the networks make it harder.
Search Networks don't like some arbitrage, not all but some. The difficulty is not getting tarred with the same brush. What they dont like is when a user gets caught in a big click loop leading through ad after ad and that is often what happens.
You should still be able to make money for a long time with arbi but be prepared to adapt. Making serious money is not nearly as easy as some would have you think.
