Lets say i got my own unique domain name and have an affiliate link inside a frame. Is this allowed for Adwords or any other PPC network?
Yeah, I think the reasoning behind it is because people were placing the ad on a good website and then placing it in an iframe on a website that was either banned or contained inappropriate content like porn, etc. The adsense account holder could select "only approved sites" to protect themselves, and still get revenue generated because the ad in the iframe was being clicked, was hosted on one of their "approved" sites, then if the ads were ever reported as being on an inappropriate site, the adsense account holder would just claim they knew nothing about it and that it wasn't on their "approved" list. So that's basically one of the reasons it's frowned on by most affiliate programs.