Neetu provided a more detailed monthly budget overview a month or so ago and now here is the billing overview for the product.
In short, Neetu recaps the differences between monthly budgets, payment settings and form of payments. Then explains the difference between automatic payments/threshold and manual payments/prepay. Finally ends with the difference between monthly budget and billing cycle.
To read the full post, see the Google AdWords Help thread.
Forum discussion at Google AdWords Help.