In interest-based advertising, advertisers show ads based on a user's previous interactions with them, such as visits to advertiser website and also to reach users based on their interests (e.g. "sports enthusiast"). To develop interest categories, Google will recognize the types of web pages users visit throughout the Google content network. As an example, if they visit a number of sports pages, Google will add them to the "sports enthusiast" interest category.

The user information collected through interest-based advertising is used in accordance with Google's privacy policies. Google does not use personally identifiable information to show interest-based ads. Google infers interest and demographic categories based on aggregated survey data on site visitation. For more information, please see:
http://www.google.com/privacy/ads/privacy-policy.html