According to sources speaking to VentureBeat, the software is said to make use of a game's characters to introduce video ads, saying something similar to "and now, a word from our sponsor."

The advertising technology would make use of Google's contextual advertising system and is reportedly functional in console games, disc- and web-based PC titles, and games for mobile phones. The software has been in testing phases for several months.

Google first made its move on the market when it acquired in-game ad firm Adscape Media in late 2006. The company was led by former Sega of America president Bernie Stolar, who now serves as Google's "Dean of Games."

The market represents yet another battleground for Google and rival Microsoft, which owns the in-game ad agency Massive, Inc. Earlier this year, Massive extended its agreement with publisher Electronic Arts earlier this year to provide streaming advertisements for upcoming EA Sports titles on the Xbox 360.

Several other developers have recently pushed forward plans for extensive in-game advertising deals, with such studios and publishers as Gearbox Software, NCSoft and THQ inking deals with ad firm Double Fusion to deliver dynamic and context-oriented advertisements to audiences.

Google has yet to make an official announcement regarding the software.