I’ve only seen Google’s own banner advertising on sites as these ads are distributed the same way that the text ads are, in that the most relevant ads are shown but take into mind a the CPC rate does come into play.
Also image banner ads are only shown on partner sites, they are NOT shown on Google, AOL.com and other search partners. Adwords image ads are only shown on partner sites using the Adsense program.
Now a person who wanted to advertise a Ski website for Canada with the Image banner ads they would need to set their account up targeting skiing related keywords, you would then have to work on the Cost Per Click (CPC) to ensure that your ad is shown.
Don’t expect Google to run your ad at 0.05 as there are many other people that are paying more for the same keywords and it’s unfair to let you take 4 ad spots for 0.05.
As with all the other Adwords in your account you’ll just have to adjust the CPC till you start seeing the banner being displayed, remember even if you put a maximum CPC of $5.00 it doesn’t force each click to cost you $5.00 it just shows Adwords what the most your willing to spend. If the Adwords system thinks your ad should be shown it might only cost you $1.00 CPC even if your minimum CPC is $5.00
Give it a try and see at what point your banner will be seen, this feature will become more and more useful as people get used to the local targeting option as by putting more controls on where you want your ads to be shown give Adwords better control on where to place your ads.