It really depends on the type of affiliates you're looking for. The most common method is a flat rate per referral while others do recurring commission, or different payouts for the amount of referrals sent over. Either way, I would recommend using UltimateAffiliate for the affiliate software.
PS: This should probably be moved to the "Running a web hosting Business" section for responses from other companies that have affiliate programs in place ;-)
Well how much can you afford from every customer that refers a customer. Say you sign up a customer on a $9.95 hosting package and they refer a customer on a 14.95 package. How much can you afford to pay the customer who referred? Obviously you want the payout amount to be a good one, but you also don't want it too high. Then again, you do not want it too low. It all boils down to what you can afford, and how many new customers are going to be signing up due to referrals.