A couple weeks ago, we reported Google updated their terms of service to disallow AdSense via IFrames.
Google has now clarified why they changed their terms to mention IFrames and explained that in some cases, IFrames are necessary and thus they provide exceptions to the rule.
Our policies have always disallowed the misuse of iframes, and recently we clarified our language to explicitly prohibit the misuse of iframes in our program policies.
Improperly iframed ads are a disservice to our advertisers since the ad itself can be obscured. Not only are they not viewable, these implementations can lead to accidental clicks if these hidden ads are placed in a location that users frequently click. Please see below for an example of a partially hidden banner.
Hidden iframed ads is one form of misuse. The other is cross-domain iframing abuse. Cross-domain iframes are used to frame content from a different site. This type of implementation can allow other sites to frame ads that belong to another site without the publisher’s knowledge.
So there you have it - it is not black and white.
Forum discussion at WebmasterWorld.