The privileges page says
What is reduced advertisements?
As a courtesy to our avid users, we automatically disable some ads when they reach this reputation level.
How do I know it's working?
After you achieve this privilege, the two "leaderboard" style ads will be automatically suppressed from question pages when you are logged in.
Except for stackoverflow.com I have never seen leaderboard ads.
Why is this privilege listed anywhere else?
A specific example I had in mind is http://judaism.stackexchange.com . As shown in gnat's screenshot, there is a 'reduce ads' privilege, yet no ads to be reduced.
I just looked up other Beta site and it looks like only http://judaism.stackexchange.com has this privilege. I don't know why it has it while say, http://history.stackexchange.com/privileges http://bricks.stackexchange.com/privileges http://travel.stackexchange.com/privileges do not.