A couple of years ago, I conducted thorough, exhaustive testing – ok, “some” testing 😉 – on the following question: what works best – borders or no borders?
The short answer is: no borders.
The long answer is: using no borders should result in increased click-thru because visitors are less likely to think the links are advertisements. Off-line publications tend to keep editorial and advertising separate. The advertising is formatted in a bold, obvious way, often using thick borders and boxes. As a result, people often ignore these areas online. People who read publications aren’t looking for links – web visitors are.
If you’re using the default setting of Adsense, and leaving borders switched on – try turning them off by making the border color the same color as your background. Chances are, you’ll find your click-thru rate will soar, especially if you position the ad units as part of your content.
PS: From the same “exhaustive” research, I found that blue links on white backgrounds works particularly well, especially for non-web savvy subject topics.