Ads can be placed on the canvas view of a gadget.
AdSense is one of the possible sources for such ads.
AdSense uses cookies and therefore requires that you show the user a
privacy policy.  The required privacy policy is not small.
A gadget can be created with the Google Gadgets Editor and hosted at
hosting.gmodules.com.
So I see two choices for displaying the required privacy policy:
  1. Put it right on the canvas page.  That's unattractive because it
takes up a lot of space.
  2. Put a separate .html file on hosting.gmodules.com and link to it
from the canvas page.
Does the latter approach conflict with any of the many Terms and
Conditions?  Does it have any other issues?  How would a user return
from such a privacy policy page to the canvas page of the original
gadget?

And, finally, a philosophical question:
  Why does it appear that the gadget developers never considered the
possiblity that people would want to put ads within gadgets and why
does it appear that the AdSense people are totally unaware of gadgets
at all (except Gadget Ads designed for display on full web pages)?
Does the left hand know what the right hand is doing?
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