First reported a couple weeks ago, it looks like Google is gearing up to launch their AdSense-driven embed-able YouTube videos program in a few hours. According to The New York Times this service will allow certain AdSense users to embed certain YouTube videos in their site that would be surrounded by AdSense ads. The revenue from these ads would be shared with both the video creator and the user who embeds the video.

It will be interesting to see what these AdSense-wrapped video players look like. Microsoft’s recent re-tooling of their MSN Video site was a bit too ad-heavy for my tastes and I think ultimately would put me off from watching content on the site if I’m going to be bombarded by 3 to 4 ads just to do so. While ‘art form’ may be debatable, these videos are still meant to be entertainment, and when your eye or brain is too focused on an advertisement to enjoy them, or if you have to wait too long to see them in our fast-twitched society, it’s distracting and annoying and certainly not entertaining.

Obviously the potential here is huge for Google and this entire industry. If Google can pull this off, the $1.65 billion they paid last year for YouTube may end up being a bargain.

Read/WriteWeb has more thoughts on this as does franticindustries.

[UPDATE]: Google’s official Inside AdSense blog has the official announcement and a sample video unit ad (pictured at the top of the post). The player itself looks decent, the orange they chose is ugly but that will be customizable. The ad along the top is relatively small and not too distracting. The ad that shows up within the video however is a bit distracting BUT you can close it out with the ‘X’ button. If for some reason you’d want to bring the ad back, you can do that as well.

There are wide-aspect players available, smaller ones, and editing the actual player is said to be very easy.

I’m watching this rather vanilla test video right now and I just have to say, I think Google has once again pulled it off. This is a THOUSAND times better than Microsoft’s ad-based video offering I mention above – but remember that these are also meant to be embedded in sites and not played on YouTube’s homepage. GigaOM has some good points about this.

Here’s more on The Official Google Blog.