Everyone loves to be able to predict the future. Now if you could only predict your future spending and whether or not additional spending would result in better results or not. Google AdWords is trying to assist you in doing just that. Here is their explanation of the simulator:

Bid Simulator takes some of the guess work out of cost per click (CPC) bidding by estimating the number of clicks or impressions you could have received if you had used a different maximum CPC bid.

From Google’s official blog here is the post related to the AdWords bidding simulator, see the tutorial here, and/or watch the video below:

Bid AdWords
A great way to bid adwords is to first be able to determine your potential best price for the ads. While this may not show your return on investment, if you already know the value of the words this will allow you to attempt to scale at the best price. Adwords bidding is an art, but with the simulator they have added a science element to this.

Typically you would have to change your bids, wait until they take effect and watch your spend change. This could take time and you would have to keep track of your changes to determine the optimum price. However with the bid adwords tool you can do this in real time without spending any money.