A value that’s used to determine the position of your PPC ad, in relation to other ads on the search results page, including whether or not it’s displayed at all. Ad Rank is primarily determined by your

• Bid amount
• Quality Score components (expected clickthrough rate, ad relevance, and landing page experience)
• the expected impact of extensions and other ad formats.

When estimating the expected impact of extensions and ad formats, Google considers such factors as the relevance, clickthrough rates, and the prominence of the extensions or formats on the search results page.

Even if your competition has higher bids than yours, you can still win a higher position at a lower price by using highly relevant keywords and ads – Hilton Johani.

Listen to Hal Varian, Google’s chief economist, as he explains Ad Rank