How do shopping directories that only provide links to other websites,
and don't actually display products, earn money from advertising for
the websites that they list in the directory?

First they earn Hits for their own site for putting more and more data
on their site.
second on each premium listing on their website they charge a pretty some.. 

and ad programe like smiley central and google adsense.. they makes
pretty much sum.
its around 500$-12000$ for a site having 20000 hits a month

i am also running my own websites and about to make some directories
cuz this business is bvery much profitable.
 for example you can see.
http://www.indiantourismandhotels.com

Hello dharmendar-ga,

From the information you've provided it seems as though you have a
good understanding of how the system works.  However, you have related
the information in terms that aren't familiar, unless you already have
some knowledge of the subject.

I would really appreciate it if you could provide more detailed
information about what you have already shared.  I think I have an
idea of what you're talking about, but I just don't know some of the
specifics you refer to.

POINTS:
>>> Earn Hits for their site
>>> Premium listing on their website they charge
>>> Ad programs like Smiley and Google

How does earning hits make money?
Why would someone pay me money to list them?
How do you make money from Smiley and Google?