Lately people have seemed to notice that the number of ads that are displayed in a single ad unit can vary. There have been threads on Digital Point Forums (and a second thread too) and Webmaster World about this. Many people are upset about units with fewer than normal ads in them because they feel the design of the site is compromised.
This is a feature that Google has had for at least four months, so I’m suspecting that all the complaints are because Google has been using them more often then they did in the past. Here is the initial description of this feature from the Inside AdSense blog.
We’ve updated AdSense to now vary the number of text ads that appear in a given ad unit. When we have a set of highly relevant and useful ads, we give them more of a presence in the ad unit by eliminating other ads. In some cases, if we determine a particular ad performs extremely well on a page, we’ll remove all other ads from the unit and show just this single ad
I have no reason to doubt Google when they say this feature, on the average, means more revenue for publishers. Remember, more money for publishers means more money for Google.
Whether or not the ads look ugly or not probably depends on the layout of a particular site. Sites that make the ads blend in using techniques like images beside the ads probably suffer the most. These ads usually look fine on sites where the ads are separated from content.