(FORTUNE Magazine) – All night long the fax machine at Jay Leno's house spits out jokes. It delivers jokes about President Bush, the Democrats who want to unseat him, Martha Stewart, Michael Jackson and his sister Janet's breast. All during the day Leno's writers type more jokes onto index cards and drop them into the Styrofoam bowl labeled JOKES HERE that sits on his hopelessly cluttered desk at NBC. They send him oddball stories from the papers, too, like the one about the minor-league pitcher for the Indians who apologized for appearing in a gay porn video, saying he had made a mistake when he was young. "You ever notice everyone who makes porn movies always claims they did it because they were young?" Leno says later, on The Tonight Show. "Of course they were young! Nobody asks old people to be in porn movies! 'All right, Grandma, drop the support hose!'" He lives off the story for days.

Jokes are oxygen to Leno. It is his peculiar talent to pick over jokes, news items, and tidbits of information--he gets about 200 to 300 submissions a day--select the funniest of the crop, and fashion them into an 11-minute monologue that will persuade millions of Americans to stay up later than they probably should for a humorous take on the events of the day:

"How many of you watched that halftime show on Sunday? Or as they're calling it now, America's Cup."

"CBS said today that's why they put that XXX in the title. That's not the Roman numeral, it's the rating!"

"Earlier today, President Bush admitted that his prewar intelligence wasn't what it should've been ... but, hey, we knew that when we elected him!"

"Today Homeland Security Chief Tom Ridge raised the security alert to Code Red.... Apparently Howard Dean has escaped!"

"I tell you, I feel great. I'm on that new Joe Lieberman diet. No matter what I do, I keep losing and losing and losing."

"Speaking of that--Ragu announced this week that they have come out with a low-carb spaghetti sauce. Which really works great ... UNTIL YOU POUR IT ON SPAGHETTI!"

Funny is money, someone said about television, and right now there is no entertainment program on network TV as profitable as The Tonight Show. NBC doesn't break out figures for its shows, but FORTUNE has learned that Tonight generates annual operating earnings of $100 million, or about 15% of NBC's profits. Unlike much of network television, it's a very good business. The show costs about $1.5 million a week to produce, far less than a single episode of Friends or ER. It generates about $3.5 million weekly in ad revenues from sponsors like movie studios, car companies, and technology firms, which pay roughly $55,000 to $65,000 for a 30-second spot. The bottom line: Since Leno became the host in 1992, The Tonight Show has generated close to $1 billion in profits for NBC.

That makes the 53-year-old jokester television's MVP--its Most Valuable Performer. In the past year or so, after a decade-long war of wits in late night, Leno has emerged as the clear winner. The Tonight Show has been averaging about 6.1 million viewers a night, compared with 4.3 million for CBS's Late Show With David Letterman. Somewhat improbably, Leno enjoys a hefty 44% advantage over the edgy Letterman among the viewers ages 18 to 49 whom advertisers want to reach.

Tonight has been a cornerstone of NBC since Eisenhower was President, and you might think its value would have faded over time. Quite the contrary. Because coming up with new hits has become so difficult in a 150-channel universe, franchises like Tonight and its morning counterpart, Today, are more important than ever. "Great series will come and go in prime time," says Jeff Zucker, president of NBC Entertainment. "But The Tonight Show and The Today Show will always be there."

Late-night television is a star-driven business. Letterman's show is the favorite of comedy cognoscenti. NBC's Late Night With Conan O'Brien has won over Gen Xers. Jon Stewart's Daily Show on Comedy Central has taken political satire to new heights. All are reliable moneymakers for their networks, but none of them hold a candle to Tonight as an entertainment business. Bob Wright, NBC's longtime CEO, says, "There are very, very few people who, like Jay, can stand up there with new material, every single night, night after night, and be appreciated by a very broad audience." Just ask Chevy Chase, Joan Rivers, Pat Sajak, Magic Johnson, Bill Maher and Keenan Ivory Wayans. Stu Smiley, a veteran television producer who now runs the Aspen Comedy Arts Festival, says, "Jay is a classic the way Bob Hope was a classic."

Even so, Leno's victory in the late-night wars comes as something of a surprise, and not just because an NBC casting director once told him that his face could scare small children. When Leno took over the Tonight desk from Johnny Carson, he stumbled. NBC executives seriously considered replacing him with Letterman. When they didn't--GE Chairman Jack Welch urged them to stick with the "loyal guy"--Letterman defected to CBS and beat Leno in the ratings for a couple of years. "Jay just put his head down and wrote three more jokes every night," recalls Bob Wright. "Talent by itself is not necessarily reliable. He has talent, and he is willing to work long hard hours at it."

Indeed, Leno understands that there's more to show business than putting on a show. He is a quirky man--hot liquids never touch his lips, and he eats the same thing for lunch every day for a year--and among his quirks, it turns out, is an intuitive grasp of business. He has a prodigious appetite for work. He earns almost as much money in his spare time as he makes at NBC. He acts as his own agent. In an industry where stars often demand to be indulged, he is an affable team player. Above all, he is a relentless salesman--he will go almost anywhere and do almost anything to win friends and influence people. "Show business is not hard," he tells FORTUNE. "It's all just basic Dale Carnegie stuff."

NBC pays Leno about $16 million a year. Yes, he's probably worth more. CBS pays Letterman about $31 million. Letterman also owns The Late Show and the talk show with Craig Kilborn that follows it, while Leno remains a hired hand. But Leno scoffs when people tell him he's getting screwed. "How am I getting screwed?" he asks. "I've got a house in Beverly Hills." Besides, Leno runs a nice little business on the side--his standup act. He does about 125 to 150 performances a year for a minimum of $100,000 a gig. That brings in another $12 million to $15 million per annum. A frequent headliner in Las Vegas, Leno also has become corporate America's favorite funnyman. His clients include the automakers, Microsoft, Goldman Sachs, and those wild and crazy guys at Ernst & Young.

"I write jokes. I tell jokes. I get paid," he likes to say. Of course, it's not quite as simple as that.

It's a Friday evening in January, and most people, including the people who work on The Tonight Show, have begun to ease into the weekend. The show was taped at 4:30 P.M. in Burbank. Jay Leno and I have squeezed into the back row of a Learjet 35, bound for Vegas. He's doing his standup act at the Mirage Hotel. He will fly back to the Mirage on Saturday, accompanied by Mavis, his wife of 23 years. (They have no children.) Both shows are sold out; about 1,500 people have paid $85 a ticket to see him. On Sunday, Leno will test new material onstage at the Hermosa Beach Comedy and Magic Club, as he does nearly every Sunday. I had heard that Leno works hard. I had no idea how hard. He rarely takes a day off and has not taken a vacation in 20 years.

When I ask him why, he tells a story. (Like many comedians, Leno deflects questions by going for a laugh.) He once had a gig in Hawaii, he says, and decided to spend a day on the beach. He sat there for what felt like hours and checked his watch. It said 10:10 A.M. "I thought the sun had broken my watch!" he says. "I'd only been there ten minutes!"

Well, what about Europe, then? Why, he asks, would you want to go to a place where they don't have TiVo in the hotel and you can't make yourself understood? "That's my impression of Europe," he says. "Excuse me, I didn't order this! Excuse me! Will you be having the eel's head in some kind of butter cream sauce?"

In full monologue mode, Leno goes on: "Seinfeld and I used to laugh. We'd say, Okay, let's say you do go on vacation. What if you like it? Now you're screwed! That's it! You're screwed now! What are you gonna do now?"

He's entertaining, but I'm pushing for more self-reflection. After a while, Leno allows that his parents drove him hard. His father, Angelo, was a wisecracking, street-smart insurance salesman who got his start selling nickel-a-week life insurance policies in Harlem. Eventually he became an office manager for Prudential. He had a big personality, and he liked making people laugh. "Try to make a good impression!" he'd tell Jay. His mother, Catherine, came to America from Scotland as a very poor teenager and was known for her frugality. She'd save jars of used cooking oil and packets of ketchup, and she once brought Jay half a sandwich from the plane when she visited him in L.A. His mother and father, who are deceased, have been fodder for jokes since Leno's early days in standup. Recently he wrote an affectionate children's book about a family cookout, called If Roast Beef Could Fly, that Simon & Schuster will publish in March.

Leno grew up in Andover, Mass. He displayed a precocious gift for comedy. As he recalls it, a fifth-grade teacher wrote on his report card, "If James spent as much time on his studies as he does trying to be funny, he'd be an A student." Instead he got mostly C's, perhaps because he was mildly dyslexic. His mother would say to him, "You know, you're going to have to work a little bit harder to get the same thing as the other kids." As a teenager, he worked at a Ford dealer in the afternoons and at a McDonald's at night.

He has not slowed down. "This sounds silly," he says, "but my attitude is, sooner or later, the other guy is going to have to eat, drink, go to the bathroom, get laid, or take a vacation, and that's when I catch him. That's always worked for me." Once, when he was home working on the next day's monologue, he flipped on the TV and saw a rival talk show host at a Lakers game. "Gotcha," he thought. "I'm working. You're playing. What are you doing? This is a school night." He won't go to bed until half the monologue is written. "I don't go anywhere," he says. "This is what I do."

Others say that Leno is driven by darker forces, including the classic insecurity of the comedian. "Working makes him feel worthy," says a colleague. That may be. But it's equally likely that Leno has gotten where he is by out-hustling the competition, and that he sees no reason to change. Warren Littlefield, former president of NBC Entertainment, recalls, "When we first renewed Jay's deal, one of his negotiating points was less vacation. That was a first for me."

If Leno had his way, production of The Tonight Show would never stop. But because the 150 or so people on the production staff need to rest, the program goes on hiatus for six weeks a year. By contrast, Letterman's Late Show shuts down for 12 weeks. That hurts CBS because reruns draw fewer viewers than originals. It's also Letterman's practice to tape two shows on Thursday and air one of them on Friday. This gives some of his people three-day weekends, but it means that his Friday shows are not as topical as The Tonight Show, which is always taped on the day it airs. "We try to do a funny version of the news," Leno explains.

The Tonight Show has had just four hosts in 50 years: Steve Allen, Jack Paar, Johnny Carson, and Leno. The challenge for Leno has been to respect its traditions while keeping the program fresh and making it his own. He began, awkwardly, by using Carson's set, which had been designed to keep Johnny, a remote figure, some distance away from the audience. Only after NBC built Leno a new 350-seat studio--where he works closer to the band and to the crowd, as if in a comedy club--did he get comfortable. The microphone on the host's desk is one of the few remnants of the old set, although it hasn't been turned on for years.

Leno has put his mark on the show in other ways. He likes politics, so The Tonight Show has become a place where politicians stop by to show their lighter side. George W. Bush and Al Gore were guests during the week before Election Day 2000. Last year John Kerry rode a motorcycle onto the set. After Arnold Schwarzenegger announced on Tonight that he was running for governor of California, Leno returned the favor by introducing the governor-elect at his victory celebration. Some critics thought that went too far.

And pity the poor politician who gets ridiculed in his monologue. Lately, jokes about Howard Dean's anger have been a staple. ("It's not looking good for Dean.... They say it's all over but the shouting.") A recent survey by the Pew Research Center for the People and the Press found that 28% of respondents "sometimes" or "regularly" got their election news from late-night TV.

Does this make Leno a political kingmaker? Not really. The thing is, the jokes work only if they reinforce ideas that are already out in there in the culture --Clinton's a womanizer, Gore's stiff, Bush is no intellectual. "I defy anyone to tell me what my politics are," Leno says. If he's not careful, the political jokes fly over the heads of the audience. "To do a John Ashcroft joke, you have to explain who he is. I had a joke a couple of weeks ago. It was 'Iraq is trying to come up with a constitution. Why don't we give 'em ours? We're not using it anymore.' The audience got it right away, and I was happy about that because it was a smart joke."

On Leno's version of The Tonight Show, the comedy has become much more important than the talk. (Jack Paar, who died last month, made a name for himself as a literate conversationalist.) When Leno took over from Carson, some viewers told NBC researchers that they didn't like him, but they liked his jokes. So he told more jokes--and when that worked, he told more. "You try to do a lot of jokes every night," he explains. "A couple of smart ones, for the smart people. A couple of dumb ones, for the dumb people. A couple of silly ones. A couple that involve a cat or a dog." The monologue has doubled in length, from five to ten or 11 minutes. It is always followed by a second comedy segment, during which Leno reads weird headlines, does the man-on-the-street interviews known as Jaywalking, or shows a taped piece from a comedy correspondent. "People will stay up for laughs," says Rick Ludwin, a veteran NBC executive who oversees late night. The first guest typically doesn't come on until midnight.

In any other business, all this would come under the heading of customer focus. That guides guest bookings, too. During the Carson era, Tonight gave little-known comedians--including Leno and Letterman--national exposure. Now the bookers seek established stars, very few of whom can spike the ratings. NBC tracks ratings minute-by-minute to see when viewers tune out, and the producers adjust their bookings accordingly. (Tony Danza won't be back soon.) One persistent problem with the talk segments is that Leno is at best an adequate interviewer, despite years of on-the-job training. Guests are allowed to prattle on about their new movie or TV show. Leno seems reluctant to ask a question that might offend anyone. He's too nice a guy.

So have you heard any good broadband jokes lately? Onstage at the Consumer Electronics Show in Las Vegas with Bill Gates, Leno introduces a special edition of Jaywalking, produced for Microsoft and the CES tech crowd. "What's DSL? Have you heard of DSL?" Leno asks a man on the street. "Probably a rapper," the guy says. The audience loves it.

Leno helped Microsoft introduce Windows 95, and he's back to tout a revamp of the MSN network of Internet services. Corporations line up to hire Leno because, unlike most standup comedians, he works clean. And he's easy to do business with. "Very unassuming, very approachable," says Microsoft corporate vice president Yusuf Medhi. "He enjoys meeting people. What you see on TV is pretty much what you get." Chris Brenner, director of Ernst & Young's Entrepreneur of the Year program, says Leno is the least demanding of the celebrities who come to the event: "This guy's incredibly wealthy, but he doesn't come across like it. He's one of us."

Money isn't the only reason Leno hits the road. Performing before live audiences tells him whether he's still connecting with the public. "You go out on the road, and they laugh or they boo," he says. "If I go to Vegas, and there are 1,800 seats and all of them are sold, then I'm doing something right on The Tonight Show. That's my barometer." Each gig is also another opportunity to promote himself and the show.

In the world of Hollywood, where high-maintenance personalities are the rule, Leno gets a lot of credit simply for acting like a regular guy. When he became host of Tonight, he visited dozens of NBC stations--his distributors--and appeared on local talk shows in places like Buffalo and Wichita. To this day he tapes promos for local stations, schmoozes with advertisers, and poses for pictures with guests before and after the show. His employer is grateful. "Jay's value to NBC is tremendous because he's a complete team player," Zucker says.

Perversely, Leno's detractors complain that he panders to his audience, tries too hard, and is compulsive about pleasing people. "Jay runs The Tonight Show like a political campaign," says Rob Burnett, Letterman's executive producer. "Dave is an artist." CBS partisans also argue that Letterman would be winning the late-night wars if he were on NBC, which has a stronger prime-time lineup and more powerful local stations. Besides, they say, Dave deserves to win. "Dave is a very courageous, original, comedically inventive guy," says comedy savant Stu Smiley, who worked with Letterman for years.

Guess what? Leno won't apologize for trying to win. "I do get grief from people. 'Oh, you don't need to do that.' No, you don't need to do anything. But you do need to keep the brand alive," he says. So he is nice to just about everyone. After he did his act in Vegas, we waited a long time for the room-service hamburgers and fries he'd ordered. The waitress got lost. The food was cold. But Leno gave her a big tip anyway. One reason he does not use an agent anymore is that he doesn't want anyone to speak for him and possibly offend a client or fan. "That's really what this business is about," he says. "Contact with the customers. Because it's really feast or famine. You meet a guy on the elevator and you say hello. Well, for the rest of your career, you are the greatest guy in the world. But if you go, 'Excuse me, I'm busy,' you are just an asshole. Lyndon Johnson used to say that every handshake is worth 250 votes, and it's really true, especially in television."

Leno tries to treat his own people well too. When he celebrated his tenth anniversary on the show, he gave everyone on the staff $1,000 for each year they'd been with him. "It was the smartest money I'd ever spent," he says. "I've always found that when a business calls itself a family, they're the cheapest bastards in the world. You pay people right, you treat them right, you get a good product." His weakness as a manager is that he's too soft. The show's executive producer, a press-shy holdover from the Carson era named Debbie Vickers, keeps people in line and pushes Jay and his writers not to get lazy about the humor.

Leno has another weakness: vehicles. He owns 180 cars, trucks, and motorcycles, many quite valuable. "It gets a little obsessive," he admits. Sometimes Leno drives his antique fire engine around Burbank, sounding the siren and giving the thumbs-up to fans. His vehicles fill two hangars at Burbank Airport and keep three mechanics busy full-time. Leno stops by every day and gets under the hood himself. "Unlike some of these Hollywood types, this guy knows what he's talking about," says Gary Claudio, marketing manager for GM Racing. Leno has driven the pace car at the Indianapolis 500--talk about a marketing opportunity!--and last year he got to test-drive the new Mercedes SLR coupe at Mercedes-Benz's proving grounds in Barcelona. He'll get the first one delivered to the U.S.

But Leno is just as likely to be found behind the wheel of his first car, a 1955 Buick Roadmaster that he bought for $300 in 1972 and has been driving ever since. (He has written that the back seat of the Buick is where he and Mavis first made love.) Leno is the ultimate creature of habit. He wears the same outfit every day--jeans and a blue-denim shirt. Last year he had chicken wings for lunch, day in and day out. This year it's turkey, always from Koo Koo Roo. "My nightmare is to be invited to somebody's house for dinner," he says. He and Mavis, a women's rights activist, socialize only in restaurants. "I can order what I want, and I don't have to insult anybody by telling them that I'm not eating your 'pesto a la grando' or some horrible thing," Leno says. Forget about serving him coffee, tea, or soup. "If it doesn't have ice in it, I don't drink it." He drinks no alcohol and says he's never smoked a cigarette or a joint: "I find that comedians either are drunks or they don't drink at all," he says.

If it seems odd that a TV format fully half a century old should be going strong today, consider this: Leno and the other late-night talk-show hosts are likely to become even more prominent as the media world changes around them. All the networks are creating fewer new stars (goodbye, Friends). The Big Three news anchors are aging, and their successors will be less important as the news is commoditized. Reality shows come and go.

Leno often seems stunned by where his everyman persona has landed him. "I know people look at me and think, Well, I could do that. If he did it, how hard can it be?" He remembers watching his dad sell insurance and tell a few jokes and thinking he'd probably do something similar. "I always thought I'd be, like, a funny salesman," he says. "I thought I'd have a job where I'd sell something and maybe be funny once in a while."

It's strange how things work out sometimes.