Travelling salesmen have been around since the mid to late 1800s and towards the end of the 1800s some companies gave these salespeople licence to train new salespeople for a percentage commission based on their sales.
In 1945 an American company called Nutrilite started the first documented MLM compensation plan, where Distributors with a proven sales track record could train new distributors for their own business. They would then receive commissions based on their own productivity and the productivity of the people they trained.
In a legitimate Network Marketing (multi-level marketing, MLM) company your commissions are always based on the sale of products. This might be from sales you personally generate, or sales generated by a member of your team, or downline, but the only way to earn commissions is by distributing products. The more products sold by you and your team, the greater your commissions!
Unfortunately, the Network Marketing business model has been open to exploitation by less reputable companies, or individuals, who have used the industry name to cover illegal pyramid schemes. In an illegal pyramid you pay money and receive no tangible goods in return. Therefore, the people promoting these schemes receive commissions for signups and not commissions based on the quantity of goods sold.