I've received some good advice here on way of increasing the click rate. But I'm starting to wonder what the real reason for blending the ads into the content... Is it to try and trick people and make them click on an ad because they think it's an internal link? Cheers!
I guess you could call it a trick. Mostly what your trying to do is give the viewer a chance to view the ads before their subconscious mind tells the viewer to ignore it because it's not part of your site.
To blend in your ads is actually one of the best ways to increase your click ratio. Yeah in a way, it's tricking the users, into some time clicking an ad while thinking it's an inside link. But it's only because what was said on the ad was of interest to them. Just be careful not to take the exact same form, color and police as google ad text in a list on internal links on your website. I saw 2-3 months ago on the adsense blog that it's not allowed anymore.
A user reading your content is more likely to click on a blended link. Sidebar/blogroll links are of secondary importance for viewer.
If your page is good optimized and adds are compatible with your content then you are making your visitors a favor if you make them click on add because they will find something that they are looking for. Classic adds are blind for visitors and because of that you should blend them with your content, then adds will be visible, but if there is no interest in that content then will be no clicks.