What is licensing/how does licensing work?

...the following is an excerpt from the International Licensing Industry Manufacturer's Association [LIMA] website.

Licensing is the process of leasing a legally protected (that is, trademarked or copyrighted) entity known as property which could be a name, likeness, logo, graphic, saying, signature, character or a combination of several of these elements, in conjunction with a product or a product line... Surely, a property can also be licensed for many non-product purposes as well...

Licensing is usually based on a contractual agreement between two business entities: the owner or agent of the property, also known as the licensor and the renter of the rights, and the prospective licensee who is usually a manufacturer. The formal permission to use the owner's property is subject to certain terms and conditions, such as a specific purpose, a defined geographic area, and a finite time period. In exchange for granting the rights for a certain property to the licensee, the licensor obtains a financial remuneration. The basic component of this payment is the royalty, which is a percentage of the licensee's sales of products which are incorporate in the property rights. In addition to that, a guaranteed minimum royalty, the guarantee, is usually required. The licensee has to pay this guarantee even in the face of total failure of the property. A percentage of this guarantee is normally paid as an advance.