When a Sim finishes performing, they will go over to the jar and collect their earnings.
How much money a watching NPC or non-controllable Sim will donate is usually determined by how skilled the performing Sim is at whatever they're doing. How much money was dropped can be discerned by how much money the donating Sim lost, however the performing Sim won't have the money added to their wallet until they pick up the jar. Other Sims passing by will come up to the performing Sim, watch briefly, and then drop money in the jar. Sometimes the option to set down a jar is delineated by the words 'For Tips' being a part of the command other times using the jar is the default. When a Sim engages in a certain activity, they will set this object down next to them before they start the activity.
It's commonly depicted as a spherical glass jar with a green Simoleon symbol on a piece of faded paper taped to it. A tip jar is a spawned object that appears in The Sims games.