Betting exchanges make their money by charging a commission which is calculated as a percentage of net winnings for each customer on each event, or market. On the whole the odds available on a betting exchange such as Betfair are usually better than those offered by bookmakers, because the middle man is eliminated, even after commission is charged.
You also have the option of being able to lay horses/players to lose and still win money, something that you definitely can’t do with the traditional bookies. Betfair in particular consistently offer up to 15-20% better odds than the traditional bookies which means when you win, you win more.
A further advantage betting exchanges have over traditional bookmakers is you can trade bets and back both sides of the book to lock in a risk free profit no matter what the outcome of a race/game. I’m not saying don’t use traditional bookies but if you’re a layer then the exchanges are the place to be since that option is definitely not available on the high street.
If you can regularly identify what punters are backing or laying en mass, then you can create winning trades based around shortening and lengthening of the price of those selections. Ultimately you can gain a serious edge developing your own methods to place bets or trades on Betfair.