Hold up here. We're talking about two different things here! Some of us are talking about putting AdSense ads on the eBay auction page to earn revenue when people visit the eBay auction. The other half of us (myself included) are talking about using AdWords to advertise an eBay auction. The latter is not only condoned, but Google actually fully encourages it. You are allowed to use PPC AdWords to advertise websites that are to domains you don't own. For example, I can have an AdWords campaign advertising my eBay auctions with the URL for the ad going directly to eBay.com. The only limitation here is that only one ad per domain will show up at one time.
Therefore, for example, suppose there is a very popular book that is sold on Amazon.com. And there are five people who are all participating in the Amazon.com affiliate program. All five of these people also have AdWords campaigns set up to advertise this particular book. Upon clicking on the AdWords ad, one is taken to the particular book details page on the amazon.com domain, with the affiliate ID in the URL. This means that if someone were to type the book's name into Google, Google would not show all five paid advertisement links to the same book on Amazon.com. It would only show one of these - and you guessed it, the best performing one and the one with the highest bid.