I have Purify installed as a content blocker for iPhone Safari. No ads in Safari. That's the main reason I don't use the mobile app.
I do get YouTube ads on my Apple TV though.
Or you could jailbreak and install YouTube++. It integrates with the official app. Gets rid of ads, allowed skip functionality long before Google did, allows background playback and downloads, lets you launch to your subscription feed, set videos to repeat, exports downloads to Camera Roll, Music Library, iMovie, VLC, etc. It's great.