Banners aren't as annoying as the pop-ups.Most people will tolerate banners but not pop-ups.They will move the targeted traffic away from your site.Pop-ups will make you lose your customers so its better to make a banner ad for your site.
There are a lot of hosts out there that offer free hosting with no ads but how long do they last in business? I personally think banners is the way to go and sticking with a host that makes its users use ads will be in business a whole lot longer than one that doesn't.
You get what you pay for, remember that. In this case, your paying with ads, choose not to and you might find your site gone and your host gone one day.
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