Google recently made some changes to the language of AdSense program policies. Google says that Publishers are encouraged to experiment with a variety of placements and ad formats. However, altering the behavior, targeting, or appearance of AdSense ads without explicit approval from Google is generally prohibited. "This behavior includes but isn't limited to placing ad code in iframes in such a way that manipulates the standard behavior, targeting or delivery of ads."
In this regard, Google has modified Ad Behavior policy to the following:
AdSense code may not be altered, nor may the standard behavior, targeting or delivery of ads be manipulated in any way that is not explicitly permitted by Google. This includes but is not limited to the following: clicking Google ads may not result in a new browser window being launched, nor may Google ads be placed in an IFRAME.
Google syas "Our policies have always disallowed the misuse of iframes, and recently we clarified our language to explicitly prohibit the misuse of iframes in our program policies. Improperly iframed ads are a disservice to our advertisers since the ad itself can be obscured. Not only are they not viewable, these implementations can lead to accidental clicks if these hidden ads are placed in a location that users frequently click." Please see below for an example of a partially hidden banner.
Hidden iframed ads is one form of misuse. The other is cross-domain iframing abuse. "Cross-domain iframes are used to frame content from a different site." This type of implementation can allow other sites to frame ads that belong to another site without the publisher's knowledge," Google stated.
Google concludes "As our program policies also note, we "reserve the right to disable ad serving to sites and/or accounts that fail to comply with these policies" without permission from Google."
Google recommend pasting the ad code directly into the source of your web page HTML.
Google also requests you to report about the sites that if you find violating these guidelines.
More Info: Program Policies
[Source:Inside AdSense blog]