How does the IPL work financially? Players are bid on by rich guys, but how do the rich guys make money from the IPL? How is the money from ads, tickets etc. distributed? What happens when a team loses or wins, and how does it affect the owners?

I will first explain the entire working model and from this the answers to the three questions asked will come out themselves.

Suppose BCCI wants to create a new IPL franchise so it will ask for bids from potential buyers in a sealed envelope. Suppose you bid for your team and you win the bid for INR 600 Crores.

This implies that you own that team for 10 years provided you pay BCCI the full amount within a fixed period( Remember Pune Franchise? They got scrapped because they could not pay their sum within a stipulated period as guildelines by BCCI and fyi Sahara had bought PWI for close to 1000 Crores!!).

So, if there are 10 teams then BCCI get INR 6000 Crores on an average for 10 years.(This is one part of their earning from the IPL).

Next, the BCCI sells the broadcasting rights of the tournament to a channel based on similar bids. for eg. the Broadcasting Rights got sold for 20,000 Crores for 10 years.

So, the franchise fees and the money generated through selling the broadcasting rights of the tournament are the main source of income for BCCI.

For the channel , the only way of earning is by showing ads(remember Strategic Timeout?, it was introduced so that the channel could show  more ads).

The next step for BCCI would be to find sponsors for the tournament , again through similar bidding process BCCI finds a title sponsor(DLF, Pepsi) and other sponsors(Citibank, Karbon Mobile e.t.c). These rights are generally sold for 5 years. Pepsi had paid BCCI 250 Crores for 5 years before IPL6. So on an average BCCI collects 500 crores for 5 years from sponsors.


Now talking about franchise's per year expenditure ,they spend 60 Crores effectively as their franchise fees and 40 crores as players salary(that is the upper cap of expenditure for player's salary). In addition to this the franchise has to spend on their team's hospitality. Taking a rough figure, the team spends around 110 crores a year. To be a profitable franchise the franchise must make more than 110 crores a year. 
BCCI does pay each team around 35 crores for the money it generated through selling the broadcasting rights of the IPL.
The franchise also generates revenue through teh tickets sold at stadium. For 8 home matches, this comes around 20 crores. The other and major part of the revenue comes for a franchise is through advertisement, franchises advertise for various brands and earn money. KKR , even after not performing well(infact was at the bottom of the ranking) in the initial IPL editions was the most profitable franchise, this is because the big brands SRK brought with him to the team(Nokia, Lux Cozi e.t.c.).

The DC had to sell their franchise as they were not able to earn profit from their franchise as the team was not playing well and as a result the sponsors were not willing to pay good sum for their advertisement.
 
This sums up the entire IPL business.
The facts are based on my reading of various articles on IPL over a period of 6-7 years. The figures are close of what I have read but can vary upto some extent.
PS: The champion and runners up team also gets a good price money so this also helps the franchise in raising the fund.