Google AdSense can provide banners ads in eight standard sizes but if you are not too sure which of these sizes will perform best on your website, read this.
The graph below shows relative click rates (CTR) for all the standard banner ad sizes (relative to the classic "full banner") and as is obvious from the picture, the ad performance or click through rates are much better for larger ad units.
Best Performing Banner Ad Sizes
If you are using a medium 300x250 rectangle format on your site, it may be a good idea to do some split testing (for say a week) and then probably replace that unit with a large 336x280 rectangle. Similarly, try squeezing in a wide skyscraper in place of that 120x600 Skyscraper that you may be having on your site.
And while it is easy to include a 728x90 Leaderboard in almost every site design, make sure that it is not the first unit in your HTML source as it is not always the best performing unit.
Another interesting point here is that the 125x125 square ad format, which is now quite popular among the blogger community, seems to attract lower clicks than even the 468x60 banner of the "geocities era" so your advertisers may not be feeling very happy about this.
The AdSense support site also suggests something very similar:
The formats we've found to be the most effective are the 336x280 Large Rectangle, the 300x250 Medium Rectangle, and the 160x600 Wide Skyscraper.
Also, wider ad formats tend to outperform their taller counterparts, due to their reader-friendly format. The wider ad format also lessens the likelihood of readers leaving the ad unit altogether.
[*] The above chart was shared in an online webinar by the AdSense optimization team and you can download the full report from DoubleClick.com. Worth reading.