This is from the Telefonica Tumblelog:
After nearly a year in closed beta, Google is expected to announce tonight that its AdSense for Video program is now open to publishers. When the program’s pilot was announced last May, AdSense for Video was intended to serve up video-in-video ads. Today the video part is gone, replaced by CPM banners and CPC text overlays.
It is getting clearer and clearer that the level of distraction people are prepared to put up with from advertising on the web is much lower than in traditional media. Hence Google abandoning video-in-video (e.g. pre-rolls) in favour of overlay.