the plugin works fairly simply. using your ad client identifier, it requests an advertisement on your behalf from the google servers, parses the content, and then sets a few variables that can be included in your RSS feed. the URLs for the advertisements change fairly frequently (even if the advertisement stays constant), so this plugin does some caching on the blosxom end so as to not cause most RSS readers to flag the advertisement as new every time the page is fetched. mehack: adding adsense to your RSS feed
May or may not be within the Google AdWords TOS. My guess is that this is something that Google themselves are looking at as well. I think I would be more likely to click on an ad in an RSS feed, but only if it is highly relevant. In fact, I might very well drop a feed if it served up non-relevant ads.