First of all, Twitter underlines that you own your tweets and not Twitter, but is allowed to share it with anyone.

Secondly, the Twitter TOS states that they may include relevant ads to the content:

The Services may include advertisements, which may be targeted to the Content or information on the Services, queries made through the Services, or other information.

Twitter wouldn’t be Twitter if they would go for the plain banner advertising, that’s why they will smartly integrate ads that are highly relevant – at least that’s what I expect from them.

There are rumors that they might also be launching a “pro” edition of twitter that gives you access to additional features and will probably not include advertisements.

Update: Oh yea, here’s the link if you want to read through the TOS http://twitter.com/tos