When Google announced their algorithm change to penalize sites using too many ads, ones that appear above the fold, the first, if not only response was, "how much is too much?"
The first, best answer is, thanks to some clarification offered by Google's Matt Cutts -- during a Google hangout/video chat session -- it's not a numbers game. Google hasn't written their algorithm to punish sites with, say, 20 ads above the fold, as opposed to the site owner who only has 19 showing. No, from the Cutts/Google perspective, the algorithm alteration inspects pages to see how the space, especially above the fold, is being used.
In fact, Google isn't concerned about the number of ads at all. Instead, they just don't want these ads -- however many are appearing above the fold -- taking up too much space. Because of the information was given during a Google+ Hangout session, as of this time, there isn't any video of it to post, although Cutts indicates if the video passes the quality control inspection, he may make it available to the public.
However, there are some important details discussing how Google determines if your site is making good use of its space, or not. The information was previously posted at the WebProNews Google+ page. To demonstrate his point, Cutts turned to visual aids:
...Cutts actually took two yellow stickies and put them on the top of a standard 8.5 x 11 sheet of paper and indicated that even if this space was just one big ad it is too much and could be impacted by Google's new algorithm change.
As you can see, it's size, not quantity Google's watching for. Does this mean you can stick hundreds of ads above the fold, as long as they don't infringe on the content's real estate? It's not something any SEO team worth their salt would recommend, however, with Google's alteration, how you use your site's space is just as important as the amount of ads used to fill these spaces.
In previous articles discussing Google's algorithm changes, sometimes, reaction comes to us in the form of "Google is trying to play God," or at least, determining how people's site should look. Some site owners are disillusioned about Google's apparent attempt to control the look and feel of the web, at least in relation to ad placement. With that in mind, it's important to remember these rules only apply if you are concerned about being in Google's search index.
If that's not a concern of yours, put as many ads in as many spaces as you want. If, however, you do want your site to be apart of Google's potential search results, it would be prudent to follow Google's suggestions. Besides, it's important to consider potential site visitors as well. It's not a pleasant visit if visitors have to sift through poorly placed ads just to find the content that triggered the search engine result.