Do you feel designing your page to make the ads blend in works best for you? Or do you feel that designing your pages so that it's about as clear as possible that AdSense ads are just that - paid ads?
On the one hand, design choice #2 COULD be best. Having excellent content and then ads related to the product/service you sell could result in clicks as kind of a discount/coupon on said product/service.
But on the other hand, my guess is that most people who click on AdSense ads don't know they are separate ads really. I think most just think they are "natural" promos links and hence likely the higher CTR on this first design choice.