I've been experimenting for the last couple of months with running campaigns for products that are banned from Google. Here are some of my findings: Can only create one ad per campaign. When you create more than one ad per campaign they ban the whole ad and all the keywords. If you create multiple one ad campaigns you are generally safe. Usually you don't get banned at all. There are exceptions to these. I have some campaigns with more than one ad and I also have campaigns that have been banned with one ad. After they ban your ad they also ban your domain(s) sometimes especially if the banned keywords are in the domain name. You can still have the page land on the same domain, but on display URL you have to use a different domain name. I don't think google really reads the ads. They just approve it quickly and let you do your thing. The only time they seem to read the ads are when you have more than one for a campaign. Yahoo seems to be stricter on this. They are similar, but I've found ads that were still approved and with decent quality score weren't getting impressions. I think this might be because they banned very similar campaigns. They also seem to take their time on approving ads.
It was good while it lasted. I got a nasty email from Google saying they were going to ban me completely and all future accounts if I keep putting up those types of ads. I had a good run for a couple of months. They did a complete ban for all ads in that niche on the same day.