Matt Cutts answers SEO questions for Google. This particular question (from India) is one people have been asking for some time. Google lets you place all the advertising you want on your website without any penalty. However, if you directly (through your own script or a third party) sell paid links, your site will be penalized by Google. Why? It has to do with manipulating search engines.
Matt answers this question in the below video (short video worth watching):
Be sure to watch the whole video, as Matt also talks about why you should use nofollow links. Also check out some of the comments – pretty harsh. Hmmm.
By the way, if you would like your own question answered on a video like the above, follow Google Webmaster on Twitter and look for an announcement when they take new questions.