that is right you can use that word but not favorites. You can simply leave it or don't put anything Shelly77
I also thought its not. i just check my site and didn't recognize after months of blogging i saw that there's a capital word SPONSORS there. If it wasn't allowed i should have been banned. So its Okay.
You can't put "Sponsor" above the advertisement, it's in their TOS. That makes it sound like the advertisor is a sponser of your website, which they are not. You can put "Advertisement" above the ads, but it is not always the best idea to do so because the ad will already say "Ads by Google".
In order to ensure a good experience for users and advertisers, publishers participating in the AdSense program may not: Compensate users for viewing ads or performing searches, or promise compensation to a third party for such behavior. Encourage users to click the Google ads using phrases such as "click the ads", "support us", "visit these links" or other similar language. Direct user attention to the ads using arrows or other graphical gimmicks. Place misleading images alongside individual ads. Place ads in a floating box script. Format ads so that they become indistinguishable from other content on that page. Format site content so that it is difficult to distinguish it from ads. Place misleading labels above Google ad units. For instance, ads may be labelled "Sponsored Links" or "Advertisements", but not "Favourite Sites" or "Today's Top Offers".
It is fine but always try to make some gap difference between both of them , so they can easily recognized separately by adsense team .