The best example of context sensitive ads I've seen, is on the Penny Arcade webcomic. It's a comic about computer games, so most/all ads there are of interest to gamers. Not only that, but the ads are made by the comic creators in the style of the comic, and they're about games/products they love. It's not just an ad, but an endorsement.

I would think that kind of ad is a lot more effective than an authentically selected ad based on your browsing history.