Google AdWords allows you to dynacially match a searcher’s query.  Aaron Wall explains it in this post.  It’s definitely helpful but it’s got a couple of drawbacks to consider before implementing.

First, if you’re bidding on broad keywords like ‘dvd player’ and you sell cases for dvd players, if you use keyword insertion for the ad, searches are going to click on your ad thinking you sell dvd players… not the kind of traffic you want to be paying for.  This is probably a bad example since you shouldn’t be bidding on that keyword anyway but it clearly gets the point across. 

Also, regular google users can tell which ads are dynamically generated and which ones aren’t.  Why does that matter? You probably already know… usually those advertisers don’t have what you’re looking for (thanks ebay, amazon, and other lazy advertisers).  If you do keyword insertion, I highly recommend capitalizing the W in keyword so that all of the words in the title of the ad are capitalized — it makes it looks a little less dynamicically generated.

One good reason to use keyword insertion is to get around use of trademarks (or inability to use them).  For example, if you sell iPod cases, you can’t put the word iPod in your ad but you can do the insertion code.  Yet, I have seen some sites place the word iPod in their ad without using insertion.  I’m not sure what it is they’re doing.  Do you know?