This function is available within your Adsense home page, under the Adsense Setup tab.
You can add the website addresses of advertisers that you want to exclude from appearing on your website, normally because they are in competition with your own page.
However, as bloggers we don't really have that much competition showing up on our Google ads. I've seen a couple advertisements appear on my page for other blogs, but they're normally specialty blogs of some kind, and if a viewer wants to head over there it's no skin off my back.
Where this filter becomes really useful is in excluding advertisements that are low profit for you. I don't want advertisements that pay me one cent for a click, because why lose a viewer for a mere cent? It's simply not worth it. So as you identify advertisements that pay next to nothing for a click, consider adding them to your filter list.
Another way the filter can help to maximize your Adsense revenue is to weed out off-topic advertising. I make no attempt to do that here, as you can see from the Britney Spears and the Replacement Windows advertising... if I've written about it, you might see it pop up, making for some awkward combinations.
But it's alright to be smarter than me. If your blog is about race cars, filter out the ads about ballet and bicycling.