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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 content displayed to the user.
A contextual advertising system scans the text of a website for keywords and returns advertisements to the webpage based on those keywords.  The advertisements may be displayed on the webpage or as pop-up ads. For example, if the user is viewing a website pertaining to sports and that website uses contextual advertising, the user may see advertisements for sports-related companies, such as memorabilia dealers or ticket sellers. Contextual advertising is also used by search engines to display advertisements on their search results pages based on the keywords in the user's query.
Contextual advertising is a form of targeted advertising in which the content of an ad is in direct correlation to the content of the web page the user is viewing. For example, if you are visiting a website concerning travelling in Europe and see that an ad pops up offering a special price on a flight to Italy, that’s contextual advertising. Contextual advertising is also called “In-Text” advertising or “In-Context” technology.
Apart from that when a visitor doesn't click on the ad in a go through time (a minimum time a user must click on the ad) the ad is automatically changed to next relevant ad showing the option below of going back to the previous ad.
Since the advent of AdSense, Yahoo! Bing Network Contextual Ads, Microsoft adCenter, Advertising.com , ads.hsoub.com Sponsored Listings (formerly Quigo) and others have been gearing up to make similar offerings.
Contextual advertising has made a major impact on earnings of many websites. Because the advertisements are more targeted, they are more likely to be clicked, thus generating revenue for the owner of the website (and the server of the advertisement). A large part of Google's earnings is from its share of the contextual advertisements served on the millions of webpages running the AdSense program.
Contextual advertising has attracted some controversy through the use of techniques such as third-party hyperlinking, where a third-party installs software onto a user's computer that interacts with the web browser. Keywords on a webpage are displayed as hyperlinks that lead to advertisers.
This sort of advertising also applies to the airline industry, with more airlines offering advertisers the opportunity to advertise on their print-at-home boarding passes, itineraries and confirmation emails. The company driving this trend is Ink, who work with many airlines to help them generate additional revenues.
Contextual advertising replaces the media planning component. Instead of humans choosing placement options, that function is replaced with computers facilitating the placement across thousands of websites.