Contextual advertising is a form of targeted advertising for advertisements appearing on websites or other media, such as content displayed in mobile browsers. The advertisements themselves are selected and served by automated systems based on the identity of the user and the content displayed.
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Contextual advertising is advertising on a website that is targeted to be relevant to the pages content. Automated systems display ads related to the content that the users of your website check.
The most famous example of contextual advertising is Google AdSense. Google robots serve ads relevant to your users. The ads are selected from the inventory of advertisers, who are registered through AdWords.
MSN AdCenter and Yahoo! Publisher Network also provide similar contextual advertising services and are valuable alternatives to Google AdSense.