From The Unofficial Apple Weblog:
Apple's iAds system actually uses lots of your information, including your iTunes purchasing history, location data, and any other download or library information it can suss out about you, to determine what ads you see. So say a few marketing firms working with the large companies now buying and selling iAds.
Is there anything wrong with that? Not really. Apple isn't running the only targeted advertising network, of course, and the whole problem with analytics firms like Flurry is that they were tracking and sharing this information anyway through third-party apps. Apple also isn't sharing your personal information; it's just connecting you with advertisers who want to speak with you, not actually telling those advertisers who you are. Apple knows what you've purchased in iTunes, but that information isn't necessarily communicated to Nissan or Best Buy.
But they make a good point that some people may not want to be tracked even if it's just by Apple. Go to https://oo.apple.com/ in your iOS 4 device's browser and register to opt out of iAds tracking.
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