I have referred to BidVertiser and Google AdSense/Adwords as being examples of Contextual Advertising. Another example is the Yahoo Publisher Network (which is currently only accepting sites that have a predominately US & English base). So, what is it?
Contextual advertising is advertising that is dynamic and changes to reflect the content of the page it’s displayed on. For example, on a page where the primary content is about mobile/cellular phones, the advertising displayed will typically be for mobile/cellular products. e.g. ringtones, screensavers, wallpaper, or for phones themselves.
This should result in a higher clickthrough ratio than traditional banner advertising, because surfers are (hopefully, it doesn’t always work quite right) only viewing ads specifically targetted at their interest. If they are viewing a page on mobile phones, then it’s supposed they are interested in mobile phone products.