You are aware of contextual advertising where ads are displayed based on the content of the web page. For instance, if you are reading an ESPN newsletter inside Gmail, the Google ads in the sidebar could be for sports related products and so on.

The buzz is however around interest-based or behavioral advertising where ads are displayed according to your past online activity and interests.

To give you an example, if you watch a video on ‘cooking pasta’ on YouTube and then switch to Amazon.com, the shopping site may show you ads for books around pasta. Or if you have been searching for “cars” on Google and then visited CNN for reading the latest news, the ads on the news site may still be related to cars.

In other words, the ads follow you even after you switch websites. The above video explains behavioral advertising in slightly more detail or you may read this detailed WSJ study on how advertisers are tracking your behavior across the web.

Opting Out of Interest-Based Advertising

If you would not like companies to use your “online behavior” to target ads on your computer, you can easily opt-out.

Google, Microsoft, Yahoo! and other web advertising networks offer simple ways to help you opt-out of targeted advertising. You can go to google.com/ads/preferences to disable the Google cookie that stores your interest related information. Microsoft offers a similar option at choice.live.com while Yahoo’s interest-based ad can be disabled here.

If you have an iPhone or an iPad, visit oo.apple.com on your mobile Safari to opt-out of receiving interest-based ads from Apple’s iAd network.

Alternatively, you may use web-based tools from NAI and PrivacyChoice to turn-off behavior advertising across dozens of popular ad networks with a simple click.

The only downside is that these tools rely on a cookie and therefore your preferences would be lost if you use a different browser or clear your browser cookies. There are some plug-ins that will help you permanently opt-out of targeted advertising but they don’t work with all browsers, especially those on a mobile phone.