iAd is Apple's breakthrough mobile advertising platform. With it, apps can feature rich multi-media ads that combine the emotion of Television with the interactivity of the Internet. For developers, it means a new and easy-to-implement source of income. For advertisers, it creates a new media outlet and advertising platform that offer consumers highly targeted and brand-relevant information.
Here's a section of Apple's Official Press Release for iAd and iPhone OS 4.0:
Today, when users click on mobile ads they are almost always taken out of their app to a web browser, which loads the advertiser’s webpage. Users must then navigate back to their app, and it is often difficult or impossible to return to exactly where they left. iAd solves this problem by displaying full-screen video and interactive ad content without ever leaving the app, and letting users return to their app anytime they choose. iPhone OS 4 lets developers easily embed iAd opportunities within their apps, and the ads are dynamically and wirelessly delivered to the device. Apple will sell and serve the ads, and developers will receive an industry-standard 60 percent of iAd revenue.
Finally, watch Steve Jobs demo Apple iAd: