Per the New York Times, Google has put the final nail in the YouTube coffin with "overlay ads":
...Google believes it finally has found the formula to cash in on YouTube’s potential as a magnet for online video advertising and keep its audience loyal at the same time.
The company said late Tuesday that after months of testing various video advertising models, it was ready to introduce a new type of video ad, which it said was unobtrusive and kept users in control of what they saw.
The ads, which appear 15 seconds after a user begins watching a video clip, take the form of an overlay on the bottom fifth of the screen, not unlike the tickers that display headlines during television news programs.
A user can ignore the overlay, which will disappear after about 10 seconds, or close it. But if the user clicks on it, the video they were watching will stop and a video ad will begin playing. Once the ad is over, or if a user clicks on a box to close it, the original video will resume playing from the point where it was stopped.