[slv77]

Assume that Qwest invests $1B in copper wire, telephone poles and central offices in 1970. The accountants write that off over the next X years because, for accounting and tax purposes its getting old and will need to be replaced. In the year 2000 all that copper and those poles have zero value on the books (called book value) but it's obvious that it still has some value.

Century Link comes along and looks at the value of all the copper in the ground and says that they will pay $1B for it even though on the books it has zero book value. That excess paid becomes good will on Century Link because they paid more for it than book value.