So far, despite the fact that I generally despise ads, I don't find this too bad. A couple of points though:
If you are going to provide an option to turn it off, it should only be available to VIP members. A premium feature like other apps. Plus, I'd like it to be optional not automatic for VIP especially if it is only player made ads going up because some of them have been amusing and/or (gasp!) useful.
Maybe not yet, but I would think you might eventually want to convert to some sort of cpm/cpc model rather than just running the ads for a set amount of time.
Finally, I totally agree with Aenir on this one. Something in the sidebar area would be better. Maybe you could add a right sidebar for the ads? Or just find a way to incorporate it into the left?