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I have a friend who was releasing a game, and when he asked steam if he could put google ads ingame, he was told no.
They do have ingame items. Its a browser based game which has around 20k players, and they just wrapped their browser site and released the website on steam
It doesn't say that on the shop page.
The type of ads Steam doesn't allow is ads on their store itself, like when you visit those news blog sites like PCGamerMag, and you see ads on the side that has nothing to do with anything like promoting cat food, toilet paper, soap, medication, or whatever.
The only ads Steam promote is ads strictly for games that on Steam store itself only, no outside ads period.
Game devs may promote things in their blogs such as other games, and like sponsors ads image like monster drink for MTX racing game, or whatever but it just an static image for everyone, not a targeting ad for anyone specifically.
Games that has their own overlay just like mobile apps on Google Play, or IOS, they normally target base by your ISP, and ISP does do ad targeting ads don't believe they're allowed, as they advertise things that not on Steam, and may advertise things that has nothing to do with gaming. But if this game only promoting other games in it, there no issues really as they're trying to promote their other games, or games they work with as well which should be fine.
When in doubt, report the game on the store page.