I knew this strategy worked; but never used it on my sites. I just added relevant images over my main adsense banner on my home page and my CTR and revenue tripled overnight. I was in shock. Here is where I added the images: http://www.acmeairsoft.com You can see that I blended the colors to make them look like the ads and the pictures were part of the site. I also added pictures to the text link ads with positive results. You can see here (scroll to the bottom of the page): http://www.acmeairsoft.com/showthread.php?t=1017 It also helped that I am coming up better in Yahoo now after being online for just over six months. I just passed the 500 unique a day mark last week. I hope this helps everyone out. I wrote a recent blog post about all this recently with more tips. You can read it here: http://www.winnpublishing.com/?p=78.
Yes this is against TOS and I have heard many sites getting banned for it lately. Strangely, I have not heard the same from Yahoo. I think that they are okay with it so far. So If you want to keep the layout switcth to YPN. Not 100% on this though.
Guys this is not against the TOS. You can find hundreds of examples of people here at DP with sites that use these tactics. People that make way more than I do and haven't been banned.