Put simply, added value is the difference between the
price which is
charged and the total costs of the
material inputs for a product, thus reflecting the input of
labour and
capital into the final product.
Value is added by the four factors of production (labour, capital, land, enterprise). Labour is probably the most prime source of added value - the quantity of manpower, and especially the quality (skill of the workers) are critical to adding value to products and services (especially the latter).
The use of capital is also very important - because companies have a larger infrastructure than most individuals, they can afford to do things more cheaply. This especially applies to services - I could do my own laundry, but I don't have the same equipment as launderette (there is also the issue of labour here - they save me time by doing it for me).
Land, obviously, is the place where all this happens.
The enterprise of the company's board or manager is also critical here - without him/her, the above wouldn't come together.
It goes without saying that the input of these factors does not guarantee added value, only if there is demand for the product or service. A product could be finely crafted and made over a process of a week, but this doesn't mean it will command a high price in the market (automatically).
Two big value added aspects these days are promotion and branding. People pay a lot to have a certain brand on their clothing - this recognition is the value added for them.