AdMob is planning special video advertisements for iPhones that play like movie clips before an app launches. In other words: time to go offline before you fire up that app. (Below, an ad for an EA game plays before a Tapulous app launches.)
These video ads, which you can sample here, will presumably be served inside games, since games make up the plurality of that apps that are both free and popular enough to monetize. Games, of course, are also the apps you're least likely to need the Web to enjoy; they're mostly stored locally, unlike, say, your The New York Times app, which is pulling all its newsy stuff from some server. Ironically, it's only been in the last few months that we've seen iPhone multiplayer games really take off. So the question is: Will video ads kill multiplayer? (Below, a normal AdMob ad.)
The ads will be hard to skip over, according to Mashable, though a skip button is clearly in the sample video; they'll probably take the tact of most streaming radio apps and only give you a certain amount of "skips" per day or per session. But simply flicking the Airplane Mode switch on your device should be enough to incapacitate the ads—it's hard to imagine any ad block would be empowered to kill an app if it couldn't download its ad content. That means a lot more people switching into Airplane Mode before playing, and therefore many fewer people playing network-reliant multiplayer games. (Or to look it another way: app-makers will seem to be punishing people who love multiplayer games by forcing them to eat video ads before playing.)
It's no surprise that the ubiquity of 3G and 4G wireless will come with ads in tow, like so many rats under the deck. But developers will need to figure out an appropriate level of choice to provide their customers. There are enough apps in the App Store that a video ad like AdMob's could easily drive people to a competing app; there's almost no friction involved in buying and downloading on the iPhone and iPod touch, so replacing an annoying game with one that isn't so annoying is cake. Being "free" just isn't the free pass for advertising that it used to be.