Auto targets allow you to target your ads to products in your Google Merchant Center feed. No keywords are necessary. Instead, you may use the product attributes from your feed to specify the subset of products you want to target (for example: serve ads for all Sony headphones in my Google Merchant Center feed).
Google's intention seems to be to allow SMBs a quick and easy way to get live on AdWords without have to do an extensive keyword build for their inventory.
The first step is to link your Google Merchant Center account to your Google AdWords account.
Once linked, build out the campaign and ad group structure that will house your ads. In general, this should reflect the way that products are listed on your website. Then select the attributes from the feed that you would like to use as the basis of targeting your ads.
This isn't exactly a simple process, but it should streamline campaign management for online retailers with large inventories.
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