Google has finally figured out a way to serve video ads in YouTube. For videos from selected partners, YouTube now displays an ad overlay that appears about 15 seconds into the video. The overlay takes up the bottom half of the screen; you can click to close the overlay, or it will disappear on its own after 10 seconds. To view the associated ad, just click the appropriate part of the overlay.
Right now, these ad overlays are added only to videos from YouTube's major content partners, and Google shares the ad revenue with those partners. You don't have to worry about Google popping an ad onto your own personal video. (At least not yet, anyway.) The response to this development is divided -- advertisers love it, while the YouTube community hates it. And so it goes.