I think Ad Words and Ad Sense are their way of carving out revenue in the PPC market.
I think the next logical move would be banner space or other types of visual media. If they were to go to a pure PPC model I think their revenues would rise for a very short time until the market corrected.
An alternative search engine based on relevance would take the place they now occupy at the top of the heap. It would be a bad business decision, so I don’t think they will head that route.