Android AdBlocker - how does it work?
The F-Droid description of AdAway, (which is a popular adblocker) is described as:


  An ad blocker that uses the hosts file. The hosts file contains a list
  of mappings between hostnames and IP addresses. When an app requests
  an ad, that request is directed to 127.0.0.1 which does nothing.


So, an adblocker redirects an app's ad requests to an IP address which produces a blank result, which prevents the ad from being visible.