From CNET: But this sets up a battleground for how advertising evolves on mobile platforms. Apple is declaring that the best way for marketers to reach mobile users is through iPhone applications, rather than the Web at large. Google and AdMob, on the other hand, are much more focused on ads delivered in the browser on mobile Web pages. And Apple made some compelling arguments Thursday about why its plan could be more effective.
Jobs said that the average iPhone owner spends 30 minutes a day using applications. So there's an awful lot of potential ad impressions at play, but mobile ads inside iPhone apps are even more annoying than desktop ads because should you happen to click on one, you're taken away from the app and into the browser.
My experience with advertisement in the sides of screens are normally not clicked by end users. The users are focused on the middle of the screen where most of the "action", one could say, is happening. However, my opinion applies to computer screens about 17 inches or wider. This may be different with 3.5 inch display screen, as the focal point is closer to the ads.
Also, users probably will not like the idea as in reality, 3.5 inch (diagonal) display is not really that large. iPhone users would like to use their screen to maximum capacity, and not have some of their precious screen space be taken up by an advertisement.
For developers/business owners reading this and wondering whether it is a business opportunity:
iAds work on a simple revenue split. 60% of revenue is given to the developer (10% lower than iPhone apps). However, apple will host and deliver all the ads to the end users.