I guess this is one of Adwords policies to prevent a single advertiser from occupying too many ad slots on a serp. Am I right about that?
AdWordsAdvisor, can I have your official comment on this when you come back from that "no"where? ;-)
You are correct. When you use the same keyword in multiple places, only one ad will show at a time. As you suggest, this is to prevent a "single advertiser from occupying too many ad slots...".
Which ad will show? Well, the system will favor the one with the higher Max CPC. If both (or all) have the same Max CPC, then it will favor the one with the highest CTR.