Performance pay means you only get $1.50 for each 1000 clicks on your article. AC either offers performance pays or upfront payments.
You can write an article about any topic that you want, not just what they are requesting. Sometimes Associated Content will pay an upfront payment for the article, sometimes they won't. I haven't quite figured out what they will accept and what they won't (I have only been submitting for a couple of months) so what I do is submit each of my articles for an upfront payment. AC will then send me an email either with a money offer or a notice that they have declined upfront payment. If they decline upfront payment, I resubmit the article as a performance payment. If I don't get an upfront payment, at least I will get a performance payment (eventually). If you write a popular article, you can get a lot of clicks. If not so popular, it can take awhile.
For all my upfront payments, AC paid me within a couple of days to my paypal account. The performance payment are paid once a month to your paypal account.
When AC declines an article, they do offer an explanation why. My first article was a review of a website which they accepted for an upfront payment. A week later I reviewed another website and they declined it saying they no longer offer upfront payments for website reviews. I was kind of bummed at first but I resubmitted the article as a performance pay and I have got a lot of clicks on it so I am still making money, just not as much if AC would have offered an upfront payment.
Hope this helps but I'm not an AC expert so hopefully someone else will chime in with some helpful advice.