I just saw this ad on a Google sidebar.
Clicking on it brings one to a neo-Nazi paraphernalia site, named NSM88 Records, where you can see such items as this T-shirt:
Apparently Google is happily accepting advertisements from neo-Nazis.
Google's AdWords policy does not seem to have any real prohibition against these sorts of ads. The closest I could find was this section on "inappropriate phrases."
The best page I could find to complain to Google was this one.