The line between traditional content and advertising on Digg is about to get much much smaller. The news-sharing site announced plans Wednesday for a new advertising platform that will intersperse ads among the streams of stories. Just like with stories, users will now be able to vote on ads that show up in the streams (Click on the thumbnail to the right for an example). Advertisers will then pay depending on the popularity of their content. “The more an ad is Dugg, the less the advertiser will have to pay. Conversely the more an ad is buried, the more the advertiser is charged, pricing it out of the system,” says Digg Chief Strategy Officer Mike Maser in a blog post.

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For advertisers, this will provide a way to get Digg users to directly interact with their content—be it good or bad. It should also motivate them to set up their ads much like the typical Digg entry, thereby breaking down the traditional content-advertising wall even further. Indeed, Maser says he expects the ads to “link to stories, video trailers, independent product reviews – many of the same types of content you see on Digg every day.” (Of course, there’s also the possibility, mentioned by the NYT‘s Brad Stone that no matter what the content is in the ads Digg users will simply vote down all the ads that show up in the stream.)

But if all goes according to plan, the platform, which Digg will start rolling out in a few months, should help the site get away from its historical dependence on display ads. The company ended its exclusive ad-sales agreement with Microsoft (NSDQ: MSFT) in late April and started to sell its inventory on its own, via an internal ad sales force. At the time, the company said it would focus more on non-banner ad sales, including custom sponsorships. Digg hired Federated Media co-founder Chas Edwards as its publisher and chief revenue officer last week.