Ad rank

From The Yaffe Center

The position of a search ad in the search page is dependent on the ad rank which is calculated by multiplying the maximum keyword bid and the quality score. The ad having a higher rank appears above the lower ranking ads.

Ad rank = max CPC (bid) * Quality score

You might have seen that for certain keywords Google also list ads on a section just above the search results. For an ad to appear on that section the ad must exceed a certain quality threshold. According to Google it ensures that only the highest quality ads appear in top spots[1].