[NSFW] adding ads in between posts

forgot to mention I got it right now that the ad is under the first post.

I would simply implement a php loop counter.

Create a function to put in functions.php that is going to output the html for the ad.

function tiny_twat_ads() { ?>

  <iframe allowtransparency="1" frameborder="0" height="124" id="plwpr5437750295eb5ecde11.86705177" scrolling="no" src="https://widget.plugrush.com/twitmytwat.com/xdz" width="499"></iframe>

<?php }

Now go into your template, index.php and find the loop and define a variable to hold the count and add this before the loop starts.

<?php $count = 0; ?>

<?php if ( have_posts() ) : while ( have_posts() ) : the_posts();  ?>
     $count++;  //this increases the integer value of our count every time the loop runs
      if ( 0 == $count % 4 )  //modulus php operator returns the remainder of division so every 4th post this will return true
            tiny_twat_ads();

        // continue with loopy stuff

this is what my index.php looks like, where should it go?

<?php
/**
 * @package WordPress
 * @subpackage Adventure_Journal
 */

get_header(); ?>

<div class="content type-category" <?php ctx_aj_getlayout(); ?>>
  <div id="col-main" style="<?php echo ctx_aj_customwidth('content'); ?>">
    <div id="main-content" <?php ctx_aj_crinkled_paper(); ?>>
        <!-- BEGIN Main Content-->
        <h1><?php echo '<span>'.single_cat_title('',false).'</span>';?></h1>
        <?php
            $category_description = category_description();
            if ( ! empty( $category_description ) )
                    echo '<div class="archive-meta">' . $category_description . '</div>';

            /* Run the loop for the category page to output the posts.
             * If you want to overload this in a child theme then include a file
             * called loop-category.php and that will be used instead.
             */
            get_template_part( 'loop', 'category' );
        ?>
      <!-- END Main Content-->
    </div>
  </div>
  <?php get_sidebar(); ?>
  <div class="clear"></div>
</div>
<?php get_footer(); ?>

Your loop is in the template loop-category.php