Shared publicly  - 
 
Matt Cutts has clarified Google's new "too many ads" algorithm change in an India Hangout tonight around 4 AM ET. The algorithm actually renders the page to determine how much space ads are taking. It doesn't matter how many ads, just the space these ads are taking. There was some speculation that Google was actually concerned about the number of ads, such as too many Google Adwords ads. They aren't. Just don't take up too much space with ads above the fold.

Matt Cutts actually took two yellow stickies and put them on the top of a standard 8.5 x 11 sheet of paper and indicated that even if this space was just one big ad it is too much and could be impacted by Google's new algorithm change.
12
10
Mark Ginsberg's profile photoRebecca Murtagh's profile photoSandy “AIDY” Hoffman's profile photoТатьяна Растяпина's profile photo
 
+Samuel King - Google will consider it an ad if it is served via DoubleClick. However, the Google algorithm for "ads above the fold" looks at your entire site (or at least a good sampling) to make its determinations. If you only have this large ad on the front page it shouldn't trigger the "above the fold" penalty.

To answer your other question, when Google does penalize for "above the fold" it does so for the entire site. It is a site penalty, not a page penalty.