The way in which AdSense determines relevant ads for your website is based on three primary factors...

1. Keywords discovered by AdSense's unique crawler
2. The AdWords Quality Score of each ad that matches your keywords
3. The visitor's demographics

The first thing that AdSense does when determining which ads to display is to gather all ads that match your keywords.
Then, it sorts those ads based on Quality Score.
The Quality Score identifies how much money that ad generates for Google.
Finally, it determines if the visitor's demographics, such as their geographic location, or search term history, can elevate an ad's Quality Score.
Determining Which Ads Match Your Keywords The AdSense crawler visits each page of your website and looks at the keyword frequency on each page, as well as the META Keywords tag, and the keywords in the domain name and filename of each page.
The easiest way to improve ad relevancy is ensure your most important keywords are in the filename of your page.
Don't use abbreviations or numbers in the file name.
Use whole words, and separate them with dashes.
For example, take a look at this article.
A good filename would be, "how-to-get-more-relevant-ads-on-adsense.
htm".
A poor filename would be, "adsenseads.
htm".
Writing good titles and subtitles can also improve relevant ads.
Use titles that answer your visitor's questions.
For example, you know that people will often search Google for "How do I improve AdSense relevancy?".
Therefore, use a title such as what I assigned for this article, "How to Get More Relevant Ads on AdSense".
That will cause AdSense to find ads that also answer the same question.
Use the most important keyword in the desired context.
That is, if you take the word "AdSense" for example, there might be ads for "AdSense Secrets Revealed" and "1,000 AdSense Templates", and "Improve AdSense Earnings".
If you're writing an article about how to improve AdSense earnings, then make sure your article remains squarely in that context.
That makes sure AdSense will display those ads.
The Quality Score Each ad in the AdWords system has an assigned Quality Score.
The score is largely based on two factors, the bid amount for that ad, and how often that ad gets clicked on.
There are other factors, including the quality of the landing page, and how well the ad is written.
But ultimately, the Quality Score determines how profitable the ad is for Google.
AdSense will give higher priority to ads that tend to earn more revenue for Google.
It's not just how high the bid amounts are, but also how often they get clicked on.
Ads with lower bids might actually get clicked on more often just because they're worded better, and thereby earn more revenue for Google.
As a publisher you can help AdWords build a click history for each ad by improving the visibility of each AdSense placement.
By placing AdSense creatives in the most visible places on your page will ultimately help AdSense figure out which ads are most likely to get clicked on.
Another thing you can do is increase traffic to your pages.
Make sure all your internal links are working.
Create more internal links.
Highlight different content pages on your homepage.
Also, make sure all of your pages are crawlable by the AdSense crawler.
Revisit your robots.
txt page to make sure no content pages are being blocked.
Make sure to submit an XML sitemap into Google Webmaster Tools.
Sometimes an advertiser will spend so much money on AdWords, that AdSense will give their ads higher priority and promote them across the entire publisher network, despite contextual relevancy.
The Visitor Demographics If you visit your own pages and noticed some irrelevant ads, it's often because AdSense is using your personal demographics to boost the Quality Score.
For example, if you're located in Los Angeles, AdSense figures that ads for restaurants in your city will have a greater Quality Score than contextually relevant ads.
Also, AdSense takes a look at your Google Search history.
If you've been searching Google for "scrapbooking clubs", AdSense will actually display ads for scrapbooking clubs" on any AdSense website you visit, including when visiting your own.
Fine Tune Your Audience Often times the reason why you're seeing so many irrelevant ads is because your audience is so varied in their interests.
That's usually the result of your content being so varied.
When you consider that Quality Score is a huge factor in determining which ads are displayed on your website, you can improve ad relevancy by changing your audience.
To do this you have to determine which ads you'd like to see displayed on your website.
Then figure out which audience is mostly likely to click on those ads.
Then, you write content that attracts that audience perfectly.
Make sure that all content you publish remains squarely in that focus.
You may also have to redesign the website, use different images, or even change your writing style.