What Google do is scan your email and target the ads on the sidebar to stuff that's relevant to your mail contents (theoretically). Thus, when your sister emails you to tell you about her dog, you'll get petfood ads and so on. In practice you're like to have a lot of poor hits but as I can't even remember looking at the sidebar in the time I've been using Gmail, it's no big deal. This is no different to the way they select the Adwords on pages on the search engine. It's not spyware but it is the cost of using a pretty good, free email service.

As an aside, I've got the usual stack of GMail invites. Feel free to PM me on the offchance the other posters run their 2,000,000,000,000 invites out.