It's time for YouTube to start earning its keep. Back when Google bought YouTube for $1.6 billion a lot of us were wondering how Google planned to make money from the video sharing site. And for a year or so, the company has been talking about embedding ads in YouTube videos. A while back, Google even started offering an ugly ad unit that fits in the border of embedded YouTube videos (pictured right).

Now NewTeeVee reports that Google is preparing to launch an improved version of its video ad units. The new ads will be in-video ads, showing up as pop-up overlays over the top of your video. Publishers will be able to decide whether or not to display ads and where they should appear in a video. Advertisers will be able to publish either short text or video ads that will show up in a video.

Like Google's text and image-based ads, they'll be chosen based on the other content of the web site. But they'll also be paired with relevant videos, which is a bit trickier to accomplish since it's not easy for a computer to decide what a video is about. But then if you've ever noticed completely irrelevant ads popping up in your Gmail, you know that's nothing new.

Update: Google has posted some more info on the company blog, including a link to Google's new video advertising page.