Jakob Nielsen reports in his AlertBox entry that most users are essentially blind to ad banners. If they’re looking for a snippet of information on a page or are engrossed in content, they won’t be distracted by the ads on the side.
The implication of this is not only that users will avoid ads but that they’ll avoid anything that lookslike an ad, even if it’s not an ad. Some heavily styled navigation items may look like banners, so be careful with these elements.
The square banners on the left sidebar of FlashDen are actually not ads: they’re content links. They do look uncomfortably close to ad banners and so may be overlooked by some users.
That said, ads that look like content will get people looking and clicking. This may generate more ad revenue but comes at the cost of your users’ trust, as they click on things they thought were genuine content. Before you go down that path, consider the trade-off: short-term revenue versus long-term trust.