YouTube has just announced from the NewTeeVee Live show here in San Francisco that it will offer advertisers a new platform to place ads within video windows. These will take up 20 percent of the overall video window and will link to advertiser Web sites or landing pages. If they aren’t engaged after 20 seconds, the embedded ads will shrink in size.

These ads will show up on YouTube proper, as well as its videos that are embedded elsewhere, such as blogs. Ads will be targeted contextually based on a combination of inputs including metadata. Little information was given about other targeting methods, such as speech-to-text technology, that could offer more contextual hooks a la EveryZing. Today’s announcement also includes new search functionality baked right into embedded YouTube videos (those found outside YouTube).

This follows a number of smaller announcements for various YouTube ad support, such as inline ads, and also follows yesterday’s launch of its sponsored videos product. Meanwhile, we knew the free lunch was coming to an end given comments by Google CEO Eric Schmidt that YouTube monetization will be a big initiative this year. The perennial challenge it faces, however, is the questionable nature of a great portion of its long-tail content in the eyes of Madison Avenue (see post earlier this week).

The strategy for ad sales and provisioning is unclear, but Google will likely be involved and we’ll chase down more details in the coming days. For now, YouTube seems excited about it, and Schmidt can ease back on claims that the company needs to do more to make money (for now).

“This will be a new revenue channel for us and our partners,” said Benjamin Ling, director of platforms and syndication for YouTube.