Two engines in ADGate. One to blocking host by changing host name lookup result of matched host name. The other is HTML tag blocking by matching tags with URL patterns in Tab 4.
Web server is used to handle the redirected traffic and serve you an empty picture instead of banners.

Here you get the total control of HTML content blocking in ADGate. Like to block just banner images? Select 'Match Image'. Embed is used by Flash, so if you want to block Flash, you have to select this option too.
To see how it is like without one option, just unselect it and reload the web page in your browser. More details can be read in ADGate Help.

Host blocking patterns here. They are used in two ways. One to block host name lookup (like in nslookup). It will change the lookup result of matched host name to 127.0.0.1 (localhost). In this way, all the traffic to that host is redirected back to your mac, there an Apache web server started by ADGate will handle the requests.
The other way is to match the host part of URLs of things you want to blocking. This like URL patterns in Tab 4, but only match host parts.