What is Header bidding?

Header Bidding is a brand-new approach to website advertising that helps publishers choose the best price for available ad spaces through auction. Different demand sources that “compete” for the same inventory hold the auction.

Introduction

The usual ad server such as Google’s DoubleClick for Publishers selects its buyers based on the rankings through the sequence which is the “waterfall” problem that Header Bidding removes.
When there is an available space on the publisher’s website, Google’s DoubleClick for Publishers offers the inventory to the direct-sold ads and if a place is still available, then it offers the inventory to the top-ranked ad exchange.
Although the ranking is based on such factors as the quantity that a certain ad exchange buys, high rankings not always create the highest revenues. The publisher might not be aware of higher rates that the new supplies offer because of the “waterfall” effect.

How does Header bidding help?

Header Bidding allows several demand sources with various histories and rankings to make a bid for the same inventory at the same time. The auction is held not only for the impressions that are left after the direct sale, but for all the available ones. This bidding process allows more demand sources to buy the place and the publishers can freely choose which bid is more beneficial for them.
Uses of Header bidding:

High CPM rates
High Fill rates
Greater insight to inventory value

Refer to this link for more information on Exchange bidding.
Another article: how does header bidding work?

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