Vigorish
Vigorish, or simply "vig", or "juice",
is the amount charged by a
bookmaker for his services. The term is
Yiddish slang originating from the Russian word for "winnings," vyigrysh. The concept is
also known as the overround.
Bookmakers use this concept to make money on their wagers regardless of the outcome. Because of the vigorish concept, bookmakers should not have an interest in either side winning in a given sporting event. They are interested, however, in getting equal action on each side of the event. In this way, the bookmaker minimizes their risk and always collects a small commission from the vigorish. The bookmaker will normally adjust the odds (or line) to attract equal action on each side of an event.
A common misconception about vigorish is that the loser pays it. Win or lose, all players pay the same commission to the bookmakers. This is figured into all bets beforehand, as illustrated below.
Example
Let's say two people want to bet on opposing sides of an event with even odds. They are going to make the bet between each other without using the services of a bookmaker. Each person is willing to risk $100 to win $100. After each person pays their $100, there is a total of $200 in the pot. The person who loses receives nothing and the winner receives the full $200.
By contrast, when using a sportsbook, each person must risk or "lay" $110 to win $100. The $10 is, in effect, a bookmaker's commission for taking the action. This $10 is not "in play" and cannot be doubled by the winning bettor. It can only be lost. A losing bettor simply loses his $110. A winning bettor wins back his original $110, plus his $100 winnings, for a total of $210.
Debate
Since the winning bettor got his full $110 wager back, plus $100 in winnings, many observers will assert that only the losing bettor paid the vigorish. Others would attest that the winner - who had risked $110 and only received $210 in the end, instead of doubling his money to $220 - is the only bettor who paid the vig. Since both bettors lay $110 to win $100, both are paying the vig.
References
DragonBets: Vigorish Explained