Google Gadget Ads are designed to be interactive, can be built using HTML or Flash, and support both cost-per-click (CPC) and cost-per-impression (CPM) pricing models.
Here's an example ad of one of the coolest bands of our time sponsored by Honda:
One member notes that this is a beta that is open to the entire advertising community (as it was previously in beta). Nice.
Cre8asite Forums members, however, are not enthusiastic because Google is apparently using the "widget" terminology - more specifically, they say that they're "distributing ads within widgets." With all the buzz lately about widgets that didn't fare so well, the ubiquitous term is wearing people out. I can't say I blame them. Widgets were cool before they became popular.
More coverage is at Techmeme.