To provide liquidity, you send in a 50/50 split of the 2 tokens at a market price. Any time someone converts from one of the assets to the other, it charges a 0.3% fee that is paid to the liquidity pool. You get to claim the percentage of the fees based on the percentage of the liquidity pool you have contributed.
Market making, in general, is a complex activity. There is a risk of losing money during large and sustained movement in the underlying asset price compared to simply holding an asset.