If you've used the Internet at all in the past few years, you've undoubtedly already seen these from other ad providers. They are ads that start out as regular box or rectangle ads, but then expand into much larger ones that sit on top of content. Yes, they are annoying.
Luckily, unlike ads on sites like ESPN.com (which are awful), Google's expanding ads won't auto-expand or do so on a mouse roll-over. They will only expand when the user clicks to interact with the ad.
And these ads could actually be somewhat useful in very specific circumstances. For example, I can't stand the tiny box ads that display movie trailers. Sometimes I actually do want to watch the trailer,but why would I ever watch it on a tiny 200x200 ad space? With expandable ads, these movie trailer players could be made larger, as Google notes in its blog post.
Like other ads, these new expandable ones come in the cost-per-click (CPC) or cost-per-impression (CPM) variety. Google has more info on its FAQ page.
Will these ad turn around the fortunes of the online ad market? No. Will they take Google's ad revenues to new heights? Probably not. But hey, it can't hurt to try new things in a market like this, and seeing as they don't auto-expand, I have no problem with them.