VentureBeat's Dean Takahashi did the reporting so I don't have to: "Sources close to the matter said that Google has developed an in-game advertising technology that allows it to insert video ads into games. In demos of the technology, a game character can introduce a video ad, saying something like, 'And now, a word from our sponsor,' before showing a short video at the end of a sequence in a game. Since testing has been going on for some time, Google could launch the technology fairly quickly, if it so chooses." Microsoft bought Massive, a company which inserts ads into games, in 2006, and Google bought AdScape, a similar startup, in February 2007. Sony's also getting into placing ads in videogames, but most past efforts have dealt with still images, not video.

Sony will open its PlayStation 3 console to to in-game ads from outside agencies, starting with IGA Worldwide. If you want to play on the Xbox, though, you'll still have to go through Microsoft subsidiary Massive. As for Google's in-games ad unit, it's doing really well — at least when you compare it to, say, Google's television and radio advertising projects. [Forbes]