The use of the word contextual is fairly new, but the practice has been in place forever. It is common to run schedules in endemic media. Beauty products in Glamour. Music in Rolling Stone, etc. On the web, there is a lot of contextually appropriate content that is not obvious from the title of the site. Networks and site can leverage their technology to ensure not only that you are in the contextually appropriate place, there is technology from companies like ClickFacts who can ensure that you don't run in places you don't want to be in.
A big deal on the Web. This is the ability to track what someone has been doing and serve up the appropriate ad. Advantage: you get advertising that is relevant to what consumers have been looking at on the Web. Disadvantage: It is all based on history and consumers may have already solved that problem and moved on. Still, research from Tacoda and others shows that behavioral targeting works.
This is my own term for what Quantcast has been talking about. (I considered calling it propinquity, but thought that too esoteric). Given that they have the ability to identify the people coming to a page of a Web site and find those people (and those like them) within inventory on the Web, media buyers and sellers hope to facilitate buys using this type of targeting in the next year. We're already tagging out client campaigns and finding out the difference between those in the publisher audience we thought we bought, vs. those who are actually served ads on the publisher site, vs. those who engage with our client's ads (wouldn't you like to know the demographic difference of those who click through vs. those who view through?) and those who actually perform an action on the site.
This is another "next big thing." Turns out that the power of social media like Facebook, MySpace and others may not be in the pages but in the connectivity. In 2009, we expect a number of contenders to roll out that will take advantage of this connectivity. Think of it as a "birds of a feather" approach. If you know that certain people are in your target, and you could identify people who had multiple connections to your known target, why wouldn't you want to reach out to them in your advertising, too?
There are other tools, of course. Geographic overlays are one. You can combine geography with almost any kind of targeting. Another is retargeting vs. those who have visited your site but not bought. This has proven to be most effective.
Whatever methods you are using, make it conscious at the plan level, rather than just being sold whatever targeting the seller has come up with. Targeting can take you a long way toward success in ROI.