Network marketing, or as it is called, multi-level marketing (MLM), involves providing goods and services directly to consumers based on individual contacts, usualy at client's home, at a workplace or at other locations outside a permanent retail place. Network marketing is actually a direct sale with whom it has a lot of similarities. The difference is that direct sales refer to the distribution metod, while multi-level marketing specifically refers to the type of compensation plan in direct sales. The members of MLM companies can earn money in two ways. First one is from the direct sales of products, and the other one is from employing and training other people to become new members, which means through the percentage of sales of the new members. Network marketing is often identified with a sales pyramid which is an illegal sales organisation. One of the main reasons for that kind of identification is a presentation of the illegal systems as a MLM system. The difference between the sales pyramid and the multi-level marketing is that the sales pyramid doesn't have the ability to distribute products or provide services. So, if there is no sale of the product, it's impossible to talk about any kind of marketing. To better understand the difference between illegal pyramid schemes and network marketing structures, it is necessary to understand the rules of functioning of the rewarding plans in multi-level marketing. Many say that multi-level marketing is the most productive way how companies can place and present the goods and services on the market. The task of this paper is to clarify what network marketing is, how the system of compensation works in network marketing, and do research about the theme.