Nope, there were no ads at the beginning. It was a big deal when they announced AdWords. And the ads were unobtrusive and often quite useful at the beginning.

Google was quite vocal about clearly marking ads, in contrast to Overture, Yahoo, and others who mixed ads into search results in the late 90s / early 2000s. I think the period when Google lightened, then entirely removed the colored background that made it easy to identify ads was an inflection point in their fall from being a company that genuinely focused on users towards becoming just another megacorp run by profit-maximizing MBAs.