Conversion Tracking helps you improve the return on investment (ROI) from your online advertising because it:
measures trends relating to the search terms people have used before seeing your ad
focuses on getting customers to complete an online purchase
shows you which ads lead to customer actions that have value for your business
automatically gives you personal details about the people who convert
ROI is the ratio of your net profit to your costs. It’s typically the most important measurement for an advertiser because it’s based on your specific advertising goals and shows the real effect your advertising efforts have on your business. The exact method you use to calculate ROI depends upon the goals of your campaign. With AdWords conversion tracking, you can see how effectively your ad clicks lead to valuable customer activity, such as website purchases, phone calls, app downloads, newsletter sign-ups, and more. Depending on the type of conversion you’re tracking, the setup process is different, so the first step in setting up conversion tracking is choosing a conversion source, or where your conversions come from.
Conversion tracking is a free tool that shows you what happens after a customer clicks on your ads — whether they purchased a product, signed up for your newsletter, called your business, or downloaded your app. When a customer completes an action that you’ve defined as valuable, these customer actions are called conversions.
Read more here: https://support.google.com/adwords/answer/1722022?hl=en