Let's take a basic coin toss for £100 as an example:
The outcome is either heads or tails, so it is a 50/50 chance. One person bets on heads and another on tails. No matter who wins, the bookmaker would have to pay out the £100, leaving no surplus for him.
That would be a rather bad business plan. So instead the bookie lowers the prize money.
Let's now say that the bookmaker lowers the payout to £90, instead of the fair £100. This is the equivalent of offering 1.90 odds instead of the fair 2.00. Since our two punters still wager the £100, the bookie will turn a profit whatever the outcome is, since he collects £100 from one punter and pays out £90 of those to the other punter, keeping £10 for himself.
This represents the bookie margin, also known as the commission, the “Vig” or “juice”, mostly in the US. And it is what makes betting such a challenge as you not only have to pick winners, but also do so at a rate of return that is greater than the bookmaker margin.