Google Chrome does not come with an option to block Internet ads. Many think that this has been a deliberate choice by the Google development team to avoid harming Google's core businesses Adsense and Adwords. Whatever the reason it surely means that the web browser is unattractive to those users who prefer to block ads on Internet websites. Several websites have posted workarounds to block ads with bookmarklets or third part solutions like Privoxy.
While that surely works it is not the same as to simply flip a switch and have the ad blocking functionality enabled on all sites automatically. This is currently not possible in Google Chrome but it is possible in its Open-Source pendant SRWare Iron. Iron is based on the Chromium source that is also used in Google Chrome. The advantages of Iron are increased privacy and security.
What many users do not know is that it is possible to enable ad blocking in the Iron browser. This is done by downloading a file called adblock.ini from the developers homepage and copying that file into the main SRWare Iron directory replacing the blank file of the same name.
The adblock.ini file contains information to block hundreds of advertisers, included are all the popular advertising companies like Google and Yahoo.
Update: A lot has changed in the last two years. Google Chrome is now supporting extensions, and several adblockers have been created for the browser to hide advertisement on websites.
Both extensions block ads in the Chrome browser. They do come with options to let some ads through and only block annoying or irritating advertisement.
The most recent version of AdBlock Plus can block more than just ads. You can use it to block social media icons for example, or tracking companies from tracking you on the Internet.
Once you have installed Adblock Plus, you will notice a new ABP icon in Chrome's address bar whenever you load websites in the browser. This icon acts as an indicator whether the ad blocker is enabled on the site you are on or not. You can click on the icon to display a prompt to disable the ad blocking on the site.
It is alternatively possible to right-click the icon to open its preferences. Here you can opt-out of non-intrusive advertising, a controversial feature that lets some ads pass through, add new lists to the application, or manage whitelisted domains.