Google just announced that they are allowing advertisers to target both gender and age in AdWords starting today. This is an important feature that I'm sure advertisers will be very happy to start using.
It makes a lot of sense to consider your target gender and age when paying for clicks -- if you are selling will kits or something, you probably don't want to bother showing your ads to people under 40. Since you are showing your ads to fewer people, you can now theoretically raise your bids to get better placement without paying anything extra.
I'm not sure where Google gets this demographic information for ads appearing on their search engine, but for content network sites (that display AdSense) like MySpace or Friendster, they provide the relevant demographics.