The profit motive is a pretty powerful force in getting applications written for a platform, and ads in free apps are one of the simplest ways of making money from an application.
Robert Gelb, a long time .Net developer, has written a Silverlight control for Windows Phone 7 which makes it easy for developers to integrate Google Admob ads in their applications (from the video, just a few steps). The application is free and open source, with the code available at Codeplex.
While Microsoft has a competing program in Bing ads the service is US-only at present, making the Admob service likely the much better option for most developers.
Download the software at Codeplex here.