Well, that would depend on the type of violation. If it's just a case of missing a specific point in the ToS I would much rather just mail the Webmaster a quick note stating what they are doing wrong. If it's a serious violation to the degree that they obviously know it's wrong, but do it just to make a quick buck, I would be inclined to report them. By reporting Adsense violations, you help to ensure the quality of the Adsense network... in the end helping yourself and your advertisers as well. That being said, I definitely don't go searching for violations.
If its a really bad violation and they seem uneager to change it (contact them first) then rat them out Remember, its those sort of people who are reducing the price per click that honest publishers are getting.
If they are doing something intentionally, hang them out to dry. It's people that break the TOS that ruin it for the rest of us.