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Heads up - updated Adsense program policies as of 6/10 explicitly disallow ads from being placed in an iframe:
The official Adsense blog goes on to say:
http://adsense.blogspot.com/2011/06/clarifying-our-ad-implementation.html
AdSense code may not be altered, nor may the standard behavior, targeting or delivery of ads be manipulated in any way that is not explicitly permitted by Google. This includes but is not limited to the following: clicking Google ads may not result in a new browser window being launched, nor may Google ads be placed in an IFRAME.
The official Adsense blog goes on to say:
We’re aware of certain ad implementations that require the valid use of iframes. As per our program policies, exceptions to our policies are permitted only with authorization from Google.
http://adsense.blogspot.com/2011/06/clarifying-our-ad-implementation.html