This is a huge deal with many implications for smartphone advertisers/publishers/users in the future. I've been a AdMob publisher for about 6 months now and know exactly why Google is making this play -- extremely smart on GOOG.
Many small publishers are having success advertising their mobile apps to new eyeballs, where the ad points directly to the app store. Conversion rate from the app store is a function of how well your product looks.
That's a lot of change! How much did they pay for YouTube? $1.65b?
"Our business development team will keep working to maximize ad revenue for the more than 15,000 mobile Web sites and applications that make up AdMob's publisher network. Our sales teams will keep working with our thousands advertisers to deliver successful campaigns and our marketing group will keep pushing to get the word out about mobile."
What a geek/inventor's dream to get so much cash for R&D... NICE!