First, how a pyramid scheme works:

Let's say Dude 1 has a product. Every time he sells this product, he gets $100 profit. He has Dude 2a and Dude 2b go sell products for him, telling them they'll get $10 for every product they sell and then $10 for every product that their friends sell if they enlist their help. So Dude 2a enlists Dude 3a and 3b, Dude 2b enlists help, and so on and so forth. So at this point you have a structure that looks like this (sorry for shitty diagram):

                        Dude 1 
                      /          \
              Dude 2a       Dude 2b
            /       \         /    \
Dude 3a        Dude 3b     Dude 4a  Dude 4b

So now at this point, if every person involved so far sells 1 product each, Dude 1 is only taking a loss of $20 per product sold and pocketing $80 profit. Dude 2a and Dude 2b each take home $10 for each product they sell, and an extra $20 if both Dude 3a and Dude 3b sell a product. Regardless of how many people get involved, Dude 1 will make no less than $80 per product sold as it is totally reliant on people in the pyramid selling his products for him, for which they are only paid their cut if they sell the product.

Why they can work (Hint: You have to be higher in the pyramid):

Typically the only person profiting from the pyramid scheme hardcore is the guy at the top. If you're at the top of the scheme, all you have to worry about is finding people for which to sell their product and encourage them to find other people to sell their products. Since it is straight commission, you do not have to worry about taking a loss on the sale of a product or recruitment of a salesperson because it is relative entirely to the volume of products sold. Like I mentioned earlier, if Dude 1 makes $100 profit off of every product sold no matter who sells it, he is making $100 per product sold, period. Of course, he has to throw in an incentive to get someone else to sell his product for him, so he offers $10 per product sold to Dude 2a who is then instructed to find other people to "work for them" and sell products. If the people who "Work for" them sell, then he will also be paid $10 extra per product. So if Dude 2a sells a product and recruits Dude 3a and 3b who both sell a product each, Dude 2a makes $30 and Dude 3a and 3b make $10 each until they recruit people to sell under them. Thus, Dude 1 loses only $20 per product, and pockets the remaining $80. The most he will make from selling a product is $100, the least he will make is $80. Either way, he is making money. Most of the time the people who own the product being sold will require the salespeople to purchase the product itself, so not only are they making no loss due to sitting on a ton of product, they're making the money back on the cost of the product AND the profit. In short, the people who own and start the pyramid make all the money, the people highest up in the pyramid who have an endless stream of friends to convince to sell for them and people to sell products to end up making the most money.

Why they can't work (Hint: It's because you're lower in the pyramid):

So someone approaches you and tells you "Hey, I'll pay you $10 every time you sell this product. Then if you find someone else to sell products with you, they get $10 per product and you get an extra $10 per product that they sell!" Wow! That sounds like an easy way to make money! So where do you go first? Probably your friends and family. "Hey, mom" you say, "Wanna buy my product?" So she does and you net $10. Then you say "Mom if you sell these products, then you'll get $10 per product!" So mom sells the product to her friend and you also sell the product to your dad. As a result, you make $20. But then mom decides she doesn't want to sell the product to anyone else, and you don't have any other friends to sell to and don't have the time or resources to go out selling to people. So you give it up and ended up having to pay for the products, you're lucky if you broke even.

As a result of your sales, however, the guy that brought you into the scheme pocketed $40 extra since you, your mom, dad, and your mom's friend all bought the product under him.

Conclusion

I ended up writing a lot more than I intended and I hope I didn't cause too much confusion. Pyramid schemes are very tricky and can be extremely appealing, but it all depends on how motivated you are to push your product and sell. Even still, it can be tough to sell. A lot of the schemes are very fishy, and a good way to tell if it is one is if there is nothing online about the company being talked about. Any "job" that requires you buy in to the product you're selling or charges anything to participate in should be an immediate red flag. Pyramid schemes are marketed heavily to college students (Cutco, anyone?) advertising that you can make $20 per hour or more. It's all about volume of salespeople and volume of products sold, but again, the only people who truly profit from it are the people that started the scheme, so if you're at the bottom, unless you have immense luck with sales and referrals, you will not make any money.