Advertising on Wordpress.com

In 2006, Wordpress.com began adding advertising to user posts. The announcement said "We're keeping the ads to a bare minimum
... they will always be plain-text so as to not distract from the rest of the page". See the original post:
http://en.blog.wordpress.com/2006/07/27/testing-ads/

The revenue from ads is used to fund the WP.com service.

Ads are not shown to logged-in users. Many of them may not even realize that ads are presented to other visitors. During 2011, an advertising blitz occurred which put aside the "they will always be plain-text" promise. Blogs were flooded with intrusive advertising which included video ads and Flash® animations.

See some examples here:
http://www.wptavern.com/crummy-advertising-on-wordpress-com

WordAds

In November 2011 Wordpress.com announced a new scheme called WordAds. It allows users who pay for a custom domain upgrade to earn revenue from ads. The announcement did not explain how earnings would be split between WP.com and participants. Some applications could be turned down:

"Selection will be based on level of traffic and engagement, type of content, and language used on a blog. Some blogs may not be accepted."