Here's an interesting approach to blog advertising: on Techmeme, sponsors pay to have their latest blog posts appear in a "sponsored post" section on the site.
As ad models go, I like this one. The sites that are sponsoring Techmeme are likely to be of interest to some of their readers, and rather than run gimmicky banners, they're just putting the blog posts themselves up. It's almost like a formalized, for-pay blogroll.
My guess is that this model of advertising on blogs will turn out to be a higher value form that the search ads and banners that are more commonly seen (and therefore command higher prices).
Another interesting feature: in order to advertise with Techmeme, you've got to have a blog. If you don't "get" blogging, your money's not welcome. It works as a built-in quality control feature from the point of view of Techmeme's readers; anybody who sponsors the site must be clued-in to blogging to even be there.