Wow. Lots of information to go through, so for right now I am going to highlight the main things.

First. Google gadgets as ads are just that, they are ads that are actually Google gadgets. These are not ads that you can add to an existing Google gadget.

This announcement does not mean you can advertise in Google gadgets, as is being incorrectly reported by several sources.

It simply means that you can have ads that are Google gadgets.
Perhaps the most interesting thing about this announcement is that your ads can be added to the the Google gadget directory
This is the newest way to distribute an ad virally, and also make you ads available to those interested in your subject.

There is a new help section for gadgets ads at Google.

Adsense has put alot of effort into this clearly, and have even created a Google Gadget Ad Editor

Google has not created a new size of ad (like I am doing) for display within exsisting gadgets. I am sure they will though.

They have a gallery of Google gadget ads, when you go there they look just like ads, but start playing with them and you will see the difference.

Pricing: “Gadget ads run on the Google content network and are priced by CPM or CPC based on our auction model. Target by site, category, demographic, geographic location, and much more.”

I will be going through these new features thouroughly and will write more about them later.

Related posts:
New Official Google Gadget Editor
Google Lively Gadget Enabled Objects
PubSub and Google. Gadget to Gadget Communication announced by Google