The developers are able to place the ads as they like (as interstitial frames before a game, after a level change, when a game is over. And so on), as well as to control the ads shown on the pages using filtering options.
The service is currently used in over 20 games from Google partners like Konami, Playfish, Zynga, Demand Media, Armor Games, Mochi Media and Zynga.
If things work out well for Google, then revenue should start flowing in in the near future. According to comScore, over 25% of Internet users play online games every week; that’s 200 million users worldwide, a huge audience that any marketer would love to reach.
Further details are available here.