AdWords is the advertising platform of Google. Once an ad is in the AdWords system, it competes against other ads to appear on relevant pages in the AdSense network. It’s through this real-time dynamic auction system that ads are ranked. The ads with the highest Ad Rank at any given moment are displayed on a site.

So how is Ad Rank determined? The AdSense Blog shows how.

It is a different issue though that when I had Google Adsense on my blog earlier which shows these Adwords, Adsense would show only blog related ads such as find blogs, search blogs, etc and none of the ads would be relevant to my technology blog?!