Winners are chosen based on the combination of your bid and other parameters of your listing (such as, e.g., its click-through rate, i.e., the likelihood that your ad is clicked when it is shown to a user). The higher you bid, the more likely you are to win the auction.
To give yourself the best chance that's in line with your strategy, create your bid value at the maximum price you would be willing to pay per click. You will never pay more than this value.
Unlike fixed-priced ads, auction-based ads bring a much fairer playing field for both the biggest and the smallest vendors.