I just posted an article on my work at home blog about residual income. This community of work at home moms will find it informative. Please ask me if you have any questions about residual income.
Residual income is when you continue to profit and earn money for actions that have since been completed. Rather than getting paid linear income, which is money earned per hour of work, you continue getting paid long after the work is done.
I designed this chart to illustrate the comparison. Notice the continual rise of the residual income over time, even though less effort is being put in, versus the linear income, where income doesn't change unless time and effort are increased.
See this article in it's entirety here