Here is an example how the odds are calculated and the payouts: (Source: Wikipedia.org)

Consider a hypothetical event which has 8 possible outcomes, in a country using a decimal currency such as dollars. Each outcome has a certain amount of money wagered:

1	2	3	4	5	6	7	8
$30	$70	$12	$55	$110	$47	$150	$40

Thus the total pool of money on the event is $514.00. Following the start of the event, no more wagers are accepted. The event is decided and the winning outcome is determined to be Outcome 4 with $55.00 wagered. The payout is now calculated. First the commission or take for the wagering company is deducted from the pool, for example with a commission rate of 14.25% the calculation is: $514 x (1 - 0.1425) = $440.76. The remaining amount in the pool is now distributed to those who wagered on Outcome 4: $440.76 / $55 = $8.00 per $1.00 wagered. This payout includes the $1.00 wagered plus an additional $7.00 profit. Thus, the odds on outcome 4 are 7-to-1 (or, expressed as decimal odds, 8). Often at certain times prior to the event, betting agencies will provide approximates for what should be paid out for a given outcome should no more bets be accepted at the current time. Using the wagers and commission rate above (14.25%), an approximates table in decimal odds would be:

1	2	3	4	5	6	7	8
$14.69	$6.30	$36.73	$8.00	$4.00	$9.38	$2.94	$11.02

In real-life examples such as horse racing, the pool size often extends into millions of dollars with many different types of outcomes (winning horses) and complex commission calculations. Sometimes the amounts paid out are rounded down to a denomination interval-in the United States and Australia, 10¢ intervals are used. The rounding loss is sometimes known as breakage and is retained by the betting agency as part of the commission.