Interest based ads (advertisements) are advertisements that appear on pages that you are browsing on, in the internet, which are specifically selected to be relevant to your interests. This means that Google is tracking some information about you, in order to prioritize the adverts you personally see (other people will see different ads).
According to Google, there is no need to worry about ‘big brother’ tendancies, since (i) you can opt out, and (ii) no personal information (identity details, bank details, etc.) is recorded.
Google has an excellent video summarizing its approach to interest based ads:
You can find your interest based ads preferences (ie, what Google thinks you are interested in) here: http://www.google.com/ads/preferences/.
According to Google, my interests are as follows:
Computers & Electronics – Software – Operating Systems – Mac
Internet – Web Design & Development
Local – Regional Content – Western Europe – Ireland
Local – Regional Content – Western Europe – United Kingdom
News & Current Events – Newspapers
Social Networks & Online Communities – Blogging Resources & Services
Society – Social Science – Psychology
Sports – Soccer
Telecommunications – Mobile & Wireless – Mobile Phones
Maybe it is already clear from the above, but since Google Ads follows your computer, not the person, if you share the computer with others, the preferences will reflect interests of all users (hence in the above, the inclusion of Irish local/regional content in my preferences!). The above list, to which I have not manually added/removed any items, fairly reflects my own interests (at least online).
What the list doesn’t do is fairly reflect/prioritize these topics. You can however add or remove topics yourself, and that way prioritize (on, or off) certain interests.
Google also points out that “Google does not associate sensitive interest categories with your ads preferences.” (I presume that this means that if you use your PC in the evening to search for ‘adult materials’ then your children won’t start getting Google Ads appearing during the day marketing “Debbie Does Dallas” DVDs when they are using Wikipedia to help them do their homework …).