Despite the fact that Google paid $1.65 billion for YouTube, the most popular video site on the web doesn't make a lot of time. Google tried to find ways to monetize YouTube and chose overlay ads (or InVideo ads) because they're more user-friendly than other formats. Instead of being forced to watch an ad before playing a video, the overlay is triggered only if you click on a small animation displayed at the bottom of the video for 10 seconds. Google made the overlay format an option for other video sites, as well.
It's interesting that YouTube shows ads only for videos created by partners (media companies, popular video creators), a small portion from the total number of videos uploaded daily.
Here's a funny video targeted to the potential advertisers on YouTube that explains how you can advertise on YouTube and why you should: