In laymans term: Witnesses earn when they produce or find a new block.
The main job of a Witness is to produce and create new blocks for the Steem blockchain. You can think of blocks as some sort of public ledger that are immutable or cannot be deleted or altered with. This blocks are the foundation of the blockchain technology. In Steem, almost all datas are being published and written to this blocks.
So how are Witnesses being paid? Again they are paid when they find and/or produce a new block. Witnesses are being paid in Steem Power for EVERY BLOCK produced. Some witnessed earn around 1 SP per block produced and some earn 0.6SP per block produced.
The thing here though is that the Top 20 Witnesses by virtue of the blockchain are prioritized first to mine this blocks. That is why almost every minute they are producing new block compared to a witness rank in the 100s where a blockcan only be produced every hour or possibly more.
Witnesses earn Steem Power to which they can power-down or leased to others, whichever way is the fastest to pay their bills. :)
We need to understand what a witnesses job on Steemit is first.
There job is to keep the block chain moving by processing the blocks. Without them Steemit wouldn't exist.
A witness needs to be elected and the more votes you have the higher up the ladder you are and the more rewards you make. There is a cost to being a witness so you have to rent a server firstly then there is your time on top of that.
A witness is paid in steem and the higher the ranking you have the more you make. Recently I heard that a witness in the lower regions would be lucky to cover the costs each month of renting a server so it is not huge amounts of money.
Where it all changes is when Steem goes up in value. Earlier in the year Steem was at $8 and now at $0.90 so a big difference.