[thesmileyone]

It is arbitrage.

Publisher (him) pays a company $xx per install.

Company (ad network) offers this to its advertisers who get payed $xx-x per install.

Advertisers advertise this app with their own creatives and angles (normally have to be approved by publisher or at very least the ad network as well as their traffic source) on different traffic sources such as FB ads, Google Adverts, and other networks. The advertisers are media buyers - they buy media and sell media and use arbitrage to make positive ROI.

This is what paid installs is.

The arbitrage idea is that you generate positive ROI (return on investment) from your P2W or IAP making more per customer than it costs to get that customer playing your game.