Adware is a software distribution model where the distributed program is described as free, and has all its features available (unlike crippleware), but the user will have to watch advertisements which make the developers money. Depending on how the program is developed, the ads may occur frequently or infrequently, and they may be dismissable after a time, or must be watched until the end. Developers who make adware frequently allow users to buy the commercial version of the program which does not feature ads. Adware is especially popular on applications designed for phones, tablets, and Web browsers which generally have a constant connection to the Internet so the program can download new ads to display. Adware is similar to nagware, except it guarantees the developers money, even if they don't buy the program.
I have an ethical problem with any adware described as free since it is actually monetized, and the users are paying for it with their time.