YouTube offers advertisers an option to display video ads (they call them Instream Ads) in the beginning of a video (pre-roll), after the video (post-roll) or even during the video (mid-roll). The longer videos, like the full-length movies on YouTube, can have multiple instream ads embedded in one video.
YouTube is also testing a slightly different style of advertising where the viewer has the option to choose the type of invideo advertising.
The viewer can either opt for one long commercial (pre-roll) and watch the entire video uninterrupted or he can opt for multiple short commercials that will pop-up at different times in the video (mid-roll). Here’s a quick video demo.
Also, if you opt for a single long commercial break, you still get the skip option but only after you have watched the first two minutes of the commercial.
Also see: How to Skip Ads on DVDs