Apple announced several major new features in the latest version of the iPhone operating system today. One of the most intriguing is iAd, Apple's own mobile advertising network that allows developers to put interactive ads into apps from the company's App Store.

During the presentation, Apple CEO Steve Jobs pointed out that advertising that works for desktop computers doesn't necessarily work for mobile phones. Jobs said that search advertising is lucrative on computers because people spend so much time there.

"Search is not happening on phones; people are using apps. And this is where the opportunity is to deliver advertising is," Jobs told reporters during the Apple iPhone OS 4 press conference at the company headquarters in Cupertino, CA.

Taking ads to a new level

Apple believes the iPhone, and related devices such as the iPad and iPod Touch, have a much greater opportunity for ad revenue without forcing users to leave apps. And the possibilities could be quite rewarding for advertisers and Apple alike.

"The average user spends over 30 minutes every day using apps on their phone," Jobs said. "If we said we wanted to put an ad up every 3 minutes, that's 10 ads per device per day. That would be 1 billion ad opportunities per day."

However, Jobs also feels that getting more ads out there isn't the only solution.

"This is a pretty serious opportunity, and it's an incredible demographic. But we want to do more than that. We want to change the quality of the ads, too," he said.

Jobs said that good advertising, especially the kind that would work on mobile devices, should be a blend of emotion and interaction. Jobs said ads on computers are great at interactivity but lack emotion. iAd focuses on displaying quality apps that do more than just get people to click something.

Another major focus of the iAd interface is not disrupting what people are doing. iAd ads will be specifically designed to keep users in the app they are using, which should increase the chances that they will interact with ads in the future.

"Today when you click on a banner ad, it yanks you out of your app and throws you onto the advertiser's web page. So people don't click on the ads," Jobs said. "Because iAd is in the iPhone OS itself, we have figured out how to do interactive and video content without ever taking you out of the app."

The move will not only help advertisers make more effective mobile ads, it will also be a boon to Apple. Apple agrees to sell and host the ads, but Apple will also keep 40 percent of ad revenues for all ads placed through iAd.

Apps within apps

Jobs demoed several different examples of the interactivity and emotion Apple wanted to see in iAd. He showed an ad for the upcoming Pixar movie Toy Story 3 that popped up in one of his apps. Instead of a static image or simple video, the Toy Story ad offered video, background wallpapers, movie times at the nearest theaters, character info and even games. It ran as sort of a sub-feature in the app he was already using.

Jobs then demoed similar apps for Nike, which let him view a video for the Air Jordan shoe and also design his own shoes, and Target, which let him choose furnishings for a fictional dorm room at the University of Michigan. The focus of all these apps was providing more of an experience than a banner ad can while keeping the user in the original app. Another way to think of iAds is they they are apps within apps.

Jobs also emphasized that this was a simple thing for developers to add into their apps, that they could even "do it in an afternoon." iAd will debut for developers when iPhone OS 4 becomes available for the iPhone 3GS and iPod Touch 3rd generation sometime this Summer. iPhone OS 4 will also come to the iPad this Fall, so iAd should be working on the tablet by then.

Apple's new ad network was just one of the many new features announced at the press conference, including multitasking for the iPhone, app folders on the home screen and a social gaming network called Game Center for gaming apps.