Google AdSense Ad Rank explained!

[mandy]

Ever wonder what determines the order in which ads appear on your site? Then you've wondered about the Google AdWords ad ranking system. AdWords is the advertising platform thousands of advertisers use to place their ads on the Google network. Once an ad is in the AdWords system, it competes against other ads to appear on relevant pages in the AdSense network. It's through this real-time dynamic auction system that ads are ranked. Those ads with the highest Ad Rank at any given moment are displayed on your site.

So, you ask, how is Ad Rank determined? While bid price (the price advertisers are willing to pay for each click per thousand impressions) is obviously an important factor, we also calculate advertiser Quality Score to make sure the best performing ads will always appear on your site. Quality Score takes into account factors such as an ad's relevancy and click-through rate (CTR) (i.e. how likely users are to click on a given ad) because a higher CTR sometimes outweighs the benefits of a higher bid price. This ensures that your site always displays the ads representing the highest revenue potential for you.

full article: http://adsense.blogspot.com/2006/02/ad-r...ained.html

Google's AdWords pricing overview has further info on how AdRank is determined.
https://adwords.google.com/select/afc/pricing.html