Why do some Google AdWords ads show at the top of the Google search results and some show only on the right? This question was the first question asked and answered to the AdWordsRep at the Search Engine Watch forums.
The AdWordsRep further clarifies:
Ads on the right are positioned by virtue of two factors, measured equally. These factors are Maximum CPC and CTR. Max CPC x CTR = your rank number. And it is your rank number as compared to your competitors rank numbers that determines position.
Ads going to the top, however, weigh CTR (which is a measure of the relevance of your ads to users) more heavily than CPC. And rather than Maximum CPC, it is the actual CPC that matters.