Adware is a software distribution model where the distributed program is free and has all its features available, but the user will have to watch advertisements at regular intervals as they use the program. Depending on the developers, these ads may be immediately dismissed, short, or painfully long. Developers who make adware frequently include a way to turn off ads for a fee (effectively, the cost of the program). Adware is especially popular on applications designed for phones and tablets which are generally expected to have a constant connection to the Internet where the program can download new ads to show. Adware is similar to nagware.
Since the user isn't paying any money for adware, I don't have an ethical problem with it, provided the developer doesn't advertise the product as "free." Since the user is forced to watch advertisements which give the developers money, it is not a free product.