You probably can't block ALL ads, but you can block most of them.
The easiest (manual) way is to use your 'HOSTS' file. This is a computer file used to store information on where to find a node on a computer network. This file maps hostnames to IP addresses.
If you put a URL in the HOSTS file, you can map it to your own system, which will make it not show up. It will display a "Failed to Connect" message where the ad goes. There are a few places on line where you can download a host file, that will have several hundred entries in it.
One of the best is "Mike's Ad Blocking Hosts file", at http://everythingisnt.com/hosts.html. Go there and he has instructions, as well as a download that will do it for you.
A sample of the HOSTS file looks like this:
127.0.0.1 localhost #this is not an ad server this is your PC
127.0.0.1 www.doubleclick.net
127.0.0.1 ad.doubleclick.net #remove this for atomfilms problems
127.0.0.1 ad.preferences.com
127.0.0.1 ads.doubleclick.com
127.0.0.1 ads.infospace.com
127.0.0.1 ads.msn.com
127.0.0.1 ads.switchboard.com
127.0.0.1 doubleclick.net
127.0.0.1 webaffiliate.covad.com
127.0.0.1 ad.iwin.com
127.0.0.1 www.nailitonline2.com
127.0.0.1 oas.dispatch.com
127.0.0.1 adserver.ads360.com
127.0.0.1 banners.adultfriendfinder.com
127.0.0.1 ads.as4x.tmcs.net
127.0.0.1 ads.clickagents.com
127.0.0.1 banners.chek.com
...
127.0.0.1 adserv.free6.com
127.0.0.1 redir.bft.nu
127.0.0.1 counter5.sextracker.com
127.0.0.1 ad.smsmovies.se
If these are in your HOSTS file, any time you try to connect to them you get the "Failed to Connect" message. The numbers in front of the URLs are redirecting the request for that url to the address for the computer it's on. The ad is not there, so it fails (and your system goes a bit faster cause it doesn't have to download the ad).
You can look at your HOSTS file by opening it in notepad. It is located in your Windows folder, at C:\WINDOWS\system32\drivers\etc. (on an XP machine). An easy way to look at it is to make a shortcut on your desktop. To make a shortcut that will open it in notepad, right click anywhere on your desktop and go to New - Shortcut. In the box that opens, type in this
C:\WINDOWS\notepad.exe c:\WINDOWS\system32\drivers\etc\hosts
and click [Next] and [Finish].
It's easier to copy and paste this in there, just highlight it, and push Ctrl-C (Windows Copy function). When you get the where you have to put in the shortcut address, push Ctrl-V (Windows paste).
If you download the file from above, look at your HOSTS before and then after you've done it. It's a bit interesting to see the difference.
It is a good idea to go to c:\WINDOWS\system32\drivers\etc before you do this and copy the old hosts, and then rename the copy oldhosts or something similar so that you can change it back (you won't want to change it back).
Good luck.