The business is simple to state and hard to run: buy at the bid, sell at the offer, repeat thousands of times, and never let inventory or informed flow eat the accumulated spread.
Quotes are skewed by inventory and by short-horizon signals such as order-book-imbalance. When flow turns informed, the correct response is to widen, skew or pull entirely — which is why quoted depth thins exactly when traders most want it.
Example: a maker quoting 20.00 / 20.02 for 1,000 shares a side captures 2 cents, $20, on a matched round trip. Do that 1,500 times a day and it is $30,000 gross. One 40,000-share informed seller that runs the price to 19.80 before inventory is cleared costs $8,000 and erases four hours of work.
Related: market-maker, adverse-selection, maker-taker, order-book-imbalance