Yahoo! has announced that they would begin a limited test of Google Inc.'s AdSense for Search service, which will deliver relevant Google ads alongside Yahoo!'s own search results.

I guess that Adsense will work great. It is just a matter how high the revenue split is going to be on the Adsense ads to drive the revenue above what Yahoo! is making from their ads.
Of course such a Google advertisement partnership would make things more difficult for Microsoft.

On top of that is the news that Yahoo! is talking to AOL and Microsoft is talking to News Corp. to make an even bigger web giant. Yahoo!, MSN and MySpace would get quite a bit more dangerous to the Google Gorilla.
More details in this Yahoo! press-release and in this Reuters Story.