As with all co-operative efforts, it's the combined effort that counts. It's all about the 1+1 = 3 idea.
First of all, all participants need to make adspace available on their website. You decide whether you offer space site-wide (all pages within yourdomain.com and subfolders) or limited to just a folder (all pages within yourdomain.com/folder/subfolder/ and deeper subfolders). This domain is called your 'Base URL' and this is the URL that you sign up with.
The network is based on a like-for-like principle. The more you give the more you receive. You can think of the combined adspace being one big 'pool' which grows in volume the more people participate. Once you have provided adspace to this pool you can take an equivalent proportion back, i.e. you get ads on other people's adspace.
Basically, when you give say 200 pages with 5 links on each page to the ad pool, you will automatically get roughly a thousand (200 x 5) ads back. What you give to the network is converted in a numerical value, referred to as 'Co-op Weight'. You can spend this weight on available adspace from the pool.
But it's not based on quantity only.
Quality is what the network takes pride in. To reward quality, Base URLs with a higher Google PR get more weight back for their adspace. Higher PR pages have more links aiming at them so 1) they are likely to rank higher thus getting more traffic from the search engines resulting in more ad impressions and 2) more links could mean more direct traffic as well resulting in more ad impressions. This is why a PR8 Base URL yields more weight than a PR2 Base URL providing the same number of pages. Note: for ease of calculation and standardization, only the PR of the Base URL is factored in.
In short: The more adspace you offer and the higher the PR of your Base URL, the more weight you get which you can subsequently spend on advertisements.
The more participants, the larger the spread of your ads, potentially reaching a larger audience. This could also help with the Link Popularity mentioned in the Introduction, it is believed that links from a range of unique domains/IP addresses yields more 'popularity' than the same number of links from just a few domains.