Interest based targeting can be based on declarative data (user profiles) or a specific form of behavioral targeting.
In the latter case, web users interests are deduced from browsing histories within a site or on a network (see also behavioral ad network).
Many elements can be used for deducing interests:
nature of page viewed on the network
scanned communication (webmail, instant messaging,..)
various interactions (comparison, simulation,..)
When an individual reach a score threshold for an interest category, he his included in this segment. On big networks users can usually consult and manage their assigned interest categories and opt-out of interest based categories (see ad preferences manager)
How Yahoo determines interests for a user:
Large behavioral ad networks offer very precise interest segments and Google Adsense Network offers more than two thousand interest categories:
Interest based targeting based on profiles is offered by publishers who, directly or not, ask visitors for their interests.
Interest based targeting on Facebook platform:
Interest based targeting by Google:
In-market targeting is a particular form of interest based targeting.