I was just on a site looking for some widget box's to add to my site and whilst viewing some of there widgets a google adsense ad popped up on top of the widget and I had to click the red x at the corner to hide it again. Is this allowed I have never seen it before? You can see what I am talking about here at the link below. http://www.widgetbox.com/widget/twitter
It's a bit borderline, I think. Google Adsense don't like people doing anything too funky with their ads (too much potential for abuse). They also don't like them being loaded in any sort of frame or window without content. I think you'd want to get special permission from Google Adsense before trying this sort of thing.
Yes It's Against the Google Adsense TOS. but now a days still many sites doing this short of things specialty in some Free PHP Ld theme Directories.
I was using one of self made widget on my other blog and while looking into my blog, i saw that this widget rather showing the blog posts, showing the Google ads. I was shocked. I had no clue whose ads are running on my blog without my permission. I was not even aware that this widget service is doing such stupid things. They are making money by flowing ads in the widgets people make there. I just removed all that shit from my blog.
I thought it would be against the TOS there ads are kinda right up in your face. They seem like a well established site, I'm sure they won't get away with it for long and I know now not to install any of there widgets. Thanks for the heads up!