AAQR: AdFree (root required)

Image via CrunchBaseAdFree is an app that uses the built-in IPTable in Android OS to filter out ads, by basically bypassing "known" ad servers (route them to nowhere). Similar apps on the PC would be Adblock on various browsers.

AdFree works quite well, but it requires root access, as you can't get to HOSTS/IPtable otherwise. It will block most banner ads inside apps, unless the banners are provided by sources not known to the list.

It is free, and it will periodically check for updates to update the list.

Keep in mind though, that a lot of free apps rely on the ad revenue to keep them free. So this is a morally conflicting problem. Still, it is your device.

And yes, I do use this app.

http://www.appbrain.com/app/adfree-android/com.bigtincan.android.adfree