Adsense ads are quite good option of making that extra bucks but when u display them on your site they will ceratinly show ads of your competitor so that may take your customers to other site.

This is very true. I would never consider putting ads on a web hosting website since they will take your potential customer off your website. You want to do everything you can to keep customers on your website

but if we start thinking this way then adsense cant be kept any site which selle products coz that way they will always lead potential customers to there competitior

Adsense is one way of making money. Your site has an edge when a visitor visits it, it has a potential of sales more than the adsense ads because the viewer already has your porfolio of products, so perhaps adsense is not really that harmless.

I've seen many hosts do this, but I cannot understand why. It is very unprofessional and, as was pointed out, can lead away business.

I totally agree with you.

AdSense on a Web Hosting Company's homepage is extremely unprofessional. It almost seems like you're desperate for money. Adsense displays relevant ads based on the content, so what do you think you are going to see? Ads for web hosting, of course.

If you want to use AdSense to make some profit, simply make another site and invest some time into it, get it established, and slap adsense on the top.

It is possible to block competitor’s ads from showing on your website. Take a look in your AdSense control panel.

https://www.google.com/adsense/suppo...=adfilter.html
You can filter competitive ads in adsense.