One comment in this interesting thread includes the statement "I haven't read the TOS" and other comments imply that users began Adwords activity without reading through the ToS in detail. That goes back to Business 101: if you sign a contract, be prepared to fulfill the terms of the contract that apply to your behavior, and know what trade-offs are set up by the terms of the contract that apply to the other party's behavior. You don't leave yourself with any legal recourse if the other party follows the contract, you do not follow the contract, and the other party uses one of its remedies (for example cancelling the contract) under the contract terms. Freedom of contract is one of the key ideas that has made the developed world more prosperous and free. You have the right to tell your friends, "I don't like the contract terms offered by [name of company]" but there is little use in supposing that a company will operate otherwise than by its most favorable interpretation of the actual words of the written agreement. Read the fine contract before agreeing to it is a general business principle that it is helpful for hackers to learn. (Yes, I am a lawyer.)
ADDITION IN RESPONSE TO FIRST REPLY:
It is, of course, unusual for most people to read in detail most contracts they agree to. When you buy an airline ticket, you agree to a contract that is in very small print on the ticket itself or on the webpage where you agree to buy the ticket, and much of the small print refers to national laws or international treaties that you probably don't bother to read. But if a particular business sets up terms that are off-putting to customers, a smart competing business may be able to figure out ways to offer better terms (more megabytes for less money, no restrictions on reselling, or whatever fits the transaction) and then advertise those terms to customers to gain market share from the first business. As long as new market entrants can set up their own agreements in a free market, the equilibrium of actual setting and enforcement of contract terms will be expected to provide consumer utility and opportunity for the business to profit. Again, that's freedom of contract. You don't have to do business with any business that offers you terms you actively dislike. If you don't think the terms are perfect or "fair," but the trade-off offered in the terms helps you do what you want to do, you may still agree to the terms.
In principle, of course you are correct. In practice, however, this viewpoint ignores a key fact of modern life.
The ToS for most services nowadays are extremely draconian and one-sided. The vast majority of the time, service providers don't bother exercising the rights they've reserved to themselves. If you try to live strictly within the safe zone of the ToS of every service you use, you'll be crippled. You either live a little bit dangerously, or you go home and hide under the bed. When someone does run afoul of Google's wrath (or whatever other service provider), often it's not because they did something unusually bad, it's simply that they had the bad luck to get noticed.
Let me use speed limits as an analogy. It's not uncommon (speaking for the U.S.) to find a highway with a posted speed limit of X MPH, and most traffic driving at X+5 or so. A police officer typically won't pull you over for driving X+5 in that situation, but technically you're breaking the law, and if they do pull you over, you'll probably wind up paying the ticket.
The situation with common ToS's is that the road is safe for up to 80 MPH, and most people are going 60, but the posted speed limit is 3 MPH. The police (service provider) can, at their whim, nail whoever they like for going 20 times the limit.
What's sad about this is that the situation does not incent good behavior, it incents keeping your head down.
I think there's a difference of kind, and not degree, between the services that you use for financial gain, and the services you use because you like them. I can understand if you don't read Facebook's TOS. I haven't. But if I used Adwords, and I depended on it as a part of my business, I would read the TOS.
Yes, good advice. But you're likely to find some large grey areas, and also some things that the ToS seems to forbid but seem reasonable / ethical, and lots of people are doing. If you avoid all of those grey and pseudo-black areas, you're hamstringing yourself. If you don't avoid them, you're vulnerable to being shut down arbitrarily. Which path do you choose?
"You don't have to do business with any business that offers you terms you actively dislike."
In the really-real world you often do have to use businesses whose terms you actively dislike due to de facto monopoly, collusion between big players, etc.
I hate Time Warner, but they are the only viable ISP that serves my area -- what am I going to do in protest of hating them, go Internet-dark at home? Yeah I could do that without, you know, dying or anything, but I'm not going to, so I grin and bear it and hope they don't "alter the deal any further".
They're regulated by your elected officials then right? call up your local representatives and discuss your concerns. Seriously. I mean it's not likely to get you any immediate results - but if nobody complains, why would any elected official do anything about it?
One problem is that even with a good knowledge of these terms you are agreeing to a lot of stuff that is far to vague, sure they will tell you that certain things will get your banned but it is up to their interpretation of these things.
As many in the comments have said, bans have often come from AdWords either misunderstanding or disagreeing with them on the nature of their business.
ADDITION IN RESPONSE TO FIRST REPLY:
It is, of course, unusual for most people to read in detail most contracts they agree to. When you buy an airline ticket, you agree to a contract that is in very small print on the ticket itself or on the webpage where you agree to buy the ticket, and much of the small print refers to national laws or international treaties that you probably don't bother to read. But if a particular business sets up terms that are off-putting to customers, a smart competing business may be able to figure out ways to offer better terms (more megabytes for less money, no restrictions on reselling, or whatever fits the transaction) and then advertise those terms to customers to gain market share from the first business. As long as new market entrants can set up their own agreements in a free market, the equilibrium of actual setting and enforcement of contract terms will be expected to provide consumer utility and opportunity for the business to profit. Again, that's freedom of contract. You don't have to do business with any business that offers you terms you actively dislike. If you don't think the terms are perfect or "fair," but the trade-off offered in the terms helps you do what you want to do, you may still agree to the terms.