Broadly speaking, two types of radio stations exist: noncommercial or public, and commercial or private. As the name suggests, noncommercial, or public, radio does not feature advertisements, while private radio does. Radio stations of an educational or religious nature, cable stations and Internet radio also fall into the noncommercial category, as they also rely on revenue from advertisements, private donations and subscription fees.
Private stations make money either through advertising or through subscription services. Those that depend on advertising will usually employ a sales team to sell airtime, just like a magazine would do to sell print ads. The amount of money a station charges for advertising time will depend on the number of listeners the station attracts and the time of the day the ad is scheduled to broadcast. The average age and income of the listeners are also deciding factors. For example, if the majority of the audience is teenagers, they are not likely to have large amounts of disposable income, so an advertisement for an expensive car or property would be unsuitable.
Cable and satellite radio stations make money through subscription service, though some also sell advertising to supplement the income. Internet radio stations are no different than conventional radio broadcasting when it comes to generating revenue, they either make their money through streaming advertisements or through donations from viewers or sponsors.
Public radio stations in the US (think National Public Radio for instance) are owned by the government and are funded by taxes, donations from individuals, or charities. In other countries, the income comes from a license fee payable by the general public. This license fee is payable annually and also covers affiliated TV stations, such as the British Broadcasting Corporation in the United Kingdom for example.
NPR or the BBC and similar channels usually receive a permit to provide certain types of programming in exchange for their funding (i.e., a certain amount of time allotted to news or, say, music by up-and-coming bands). Other noncommercial radio channels of an educational or religious nature rely on donations and are generally run directly by educational institutions or local churches.