Well it depends on how paranoid you are. I was worried about it at first, but then I'm not going to be sending child **** via gmail (or any other mail for that matter), so I'm not too worried about potential spying.
As for the ads themselves, you can see them on the right side of the screenshot I posted earlier. They're identical to the ones you see when you run a google search, and are always text-only.
The interface itself rocks. It's ten times better than any other e-mail I've used. Loads better than hotmail, which I've grown to hate recently. The "conversation" mode displays series of e-mails like a forum thread, it really is nice.
If nothing else, you can just use it for a gig of free web storage, I guess.