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I know they do not allow plugins on wordpress.com and hence no ads. I know I can put adds on own wordpress site hosted on my own domain. But I really like wordpress.com and the ease you can create blogs there. Is there any decent way that I can put my ads on google? Weren't they allowed the ads before?

Or would anyone encourage me to go with my own site instead of wordpress.com ?

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No, you cannot, unless you have 25,000 pageviews/month, as stated here! http://en.support.wordpress.com/advertising/

Go with hosted or self-hosted solution of Wordpress instead.

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