Account Set Up
First, you'll need a Google account . If you've set up a Gmail account, a Google+ account, or use one of Google's other services you already have one and you simply log in, otherwise you'll need to create a new one and confirm the information they email to you. Next, log into AdWords and follow the prompts to set up your AdWords account. If you're using one of the coupons floating around you'll still have to set up billing information. You'll have a chance to limit spending to the $100 credit by selecting Manual Payments, this will end your advertising when the coupon credit has run out.
Choose Billing, Billing Preferences to set this up. Choose your country and enter your contact information. Note that Google sales reps might call if you don't make it through the setup process or if you leave a unused balance in your account. Whether this is a good thing or a bad thing is up to you, it can be nice to discuss setup and options with them.
You'll finally be able be able to enter the coupon code on the Billing setting page. Include the dashes, when I used one of these the code wouldn't work without the dashes. You'll then have to agree to Google's terms of service.
Create Your First Campaign
Now you're ready to get to the real work. Click Campaign, Create First Campaign. I'd set the Campaign Type to Default to start, though you can experiment with different campaign types if you want to specialize your campaigns. Next, choose a location for your ads to run. Think about whether the product or service you're offering would be better focused on your local area or nationwide. Consider creating separate campaigns if you want to split the advertising between a local focus and a nationwide audience. You can also target specific networks and devices (browsers, mobile, etc) if you wish. I'd start with all available sites and all devices but narrow things down if you have a specific audience in mind.
Set a default bid. This is just the rate that Google fills in when you select keywords, it isn't the final bid. I'd choose a low rate, 10 to 20 cents to start with. You'll go back through and raise bids on individual keywords later.
Set a relatively low daily budget. You'll want to take the first few days to fine tune various aspects of your campaign such as keywords, ad wording and bids. A low initial budget will let you start getting feedback and leave plenty of budget for a fine tuned ad campaign and you can raise it later to keep the traffic flowing. The last options are the Ad extensions, consider adding location information, a phone number link and Google+ profile links if it is appropriate for your ad. Google is pushing these local and social aspects hard, they feel there are benefits to incorporating them. You can also take a look at the advanced settings, this gives you additional options to fine tune scheduling, demographic preferences and optimization.
Create your Ads
Your next step will be to create an ad group. This is simply an additional way to organize multiple ads within a campaign. After creating a group you'll finally get a chance to write your ad. Start with a text ad and write a simple headline. Write the two lines of description as a call to action or a quick description of the product or service you're promoting. Set the display URL to your website name.
The destination URL should go to a landing page, a custom page designed just for these ads that convinces your site visitor to act. On this page describe the products or services you are promoting and convince your site visitor to act.
Once you've saved your first ad, go back and create a few more, changing the headline and wording slightly. Emphasize different aspects of your services or describe your product in different ways. Write a stronger call to action in the description. While this might seem like a waste of time after you've agonized over the wording of your first ad, it gives Google an opportunity to pick the ad that is getting the best response.
Now you'll choose the search phrases that will cause your ad to be displayed. Google provides a number of tools to assist you in doing this, from automatically choosing them based on your landing page (you did create one, right?) to expanding a keyword list based on a few suggestions. Generate a nice list of keywords, don't worry about having too many as you can adjust later based on the results you're getting from each keyword combination. Remember that people often search more than one word, create a number of phrases to fine tune the searches you want your ad to appear in.
Once you save a keyword list you can start reviewing bids on individual keywords. Google will probably alert you to bids that need to be raised, check those keywords and raise your bid if those are searches you definitely want to appear on. Lower cost searches will bid for lower than your default, you don't need to worry about dropping that bid too far unless you're looking at some high traffic but low CPC (cost per click) keywords.
Save this campaign and start it. Unfortunately, you won't see results in the AdWords interface right away but if you have Google Analytics installed (you do, don't you?) you can look at the real-time stats there.
Review your campaign.
Log into your Adwords account the day after you start it and review stats. Take a look at how your keywords are doing, you may want to adjust bids to drive more traffic to better performing keywords and reconsider poor performers. Review how your multiple text ads are doing, you'll probably see one with most of the traffic. Google picks the best performing ads and displays them most often. You can often increase clickthroughs by making a few new versions of your best performing ad and activating them.