Text-link-ads.com and LinkWorth.com are the good ones. At least I use those. LinkWorth has been performing a little better.
Yes they're compatible with adsense because they're a different kind of ads, not contextual. Aside from in-line there are plain links in sidebar and such, but I think in-line are getting popular.
There's two types of in-line as well, one is where you just have a few words linked to somewhere and the other is where the words are double underlined and when you hover over them it shows a pop out with the ad (which is a more annoying kind, but possibly more profitable).