One distinction might be targeting: Depending on the directory and it's SEO or AdsenseOptimization the targeting of the ads "to the website taxonomy at the given level" might not be all that good. So, you click through looking for british-blue-widget-engineering-services and, instead of find that you find Adsense ads for "funny widgets" or the like.
Then again, paid listings above the fold can sometimes be "run of site" - in which case they aren't really spot on as one drills deeper into the directories taxonomy in search of particular information.
Paid listings inserted by the directory webmaster above the fold that are specific, relevant and responsive to visitor expectations at that level of the directory taxonomy are a good thing in my book.
Visitor expectations is a big factor.
Have you ever drilled down into a so-called directory only to find no real listings, a big Adsense block, and some barely related and disorganized (intentionally discombobulated?) "content" below the fold - whose only real purpose/utility is to serve MediaBot?
The "Big Adsense Block" and the "Run of Website Featured Ads" model is prevalent. It has its "working elements" and its dysfunctional elements.
As I stated, above, big block ads might even be a good thing - from a certain POV - if the advertising revenue enables the directory webmaster to devote more resources to improving the substance, quality and operation of the directory itself. And there's the other constant: Is the directory and the directory clickthroughs driving outbound traffic that converts/benefits the advertiser? Or, as always, is the outbound click-event more about the link being the most convenient or available point of escape from an otherwise useless webpage?
But, then again, actions - such as improving on the listings and their display - might detract from people clicking on the Adsense ads . . and who would want that to happen? I guess that's an argument against improving the directory, at least to some people, right? ;-P
[edited by: Webwork at 6:14 pm (utc) on Oct. 8, 2006]