I don't use DFP but I have been considering using it. Like you, I have run into the same problem of poor documentation about implementing Adsense with it. You would think that Google would have done a better job of describing how to use their major product.

...if I enable adsense for an ad unit, it will serve adsense ads based on some criteria (which I can't figure out), almost like a default kind of thing.

From DFP help:
"When will Google AdSense compete with my ads?
Google AdSense content will appear in an ad unit only if all of the following criteria are met:
* AdSense is enabled for the ad unit.
* The competing line item's type is network, bulk, price priority or house.
* The CPM of the AdSense ad is higher than the alternatives."
[google.com...]

The third criteria is interesting. Does that mean that we can arbitrarily set a CPM of, say $2, on ads from another ad network? Then only Adsense ads paying more than $2 will be shown?

That seems to be confirmed by this other help item:
"AdSense is also able to compete in real time on price with your non-guaranteed inventory, to make sure that you're always showing the most valuable ads. If AdSense can pay you more than the alternative, an AdSense ad will be shown. When that's not the case, an ad from your highest-paying, non-guaranteed inventory will be shown.
Google will always serve the highest-paying AdSense ad available and will never lower the price of the winning ad or reduce your earnings from it. "
[google.com...]

Could someone using DFP clarify this?

It's been a couple years, and they've probably changed some things. I do need to get back to it, but it was so painful the first time, I'm not looking forward to it.

But from what I remember, it's not automatic. You still have to create your AdSense blocks and upload them. You just have to specify to use them as backfill if the other ads CPM isn't high enough (and yes, you provide that CPM - if you're selling direct advertising, how is Google going to know what your CPM is?)

One note of caution, I did notice when I was using DFP (it was Ad Manager back then) that it seemed to drive my ad impressions up to an alarming rate. I don't know why. But of course, that made my CTR look really horrible.

The first entity (be it Google or someone else) to make a really easy to implement Ad Manager, with documentation and support, will be the big winner in the space. I would gladly pay for such a thing, if it existed. There really needs to be a simple solution for the people with ad management requirements BETWEEN just slapping some code on pages in a site, and agency-level ad delivery. Gotta be a demand there.

(and no, OPENX doesn't count. Already ruled that out)

So, in reply to the OP's question:

What are the pros and cons of one versus the other?

I'd say that if you want to make sure that you're always showing the most valuable ads, you would probably have to enable Adsense via the options in DFP.
If you paste Adsense code into a creative, the system would probably not be able to determine if Adsense had an optimally priced ad available.

If you need more features, there is the pro version of DFP and also DART, but I think you have to pay for them.
[google.com...]
[google.com...]

Netmeg, did you get the high impressions in your DFP report or in your Adsense report?
One thing that I wasn't sure about is whether to name channels differently in DFP, or keep the names the same as in Adsense. If the name is the same in both, maybe impressions are counted double.

I don't remember exactly, it was three years ago.

Great post this exactly what I was looking for. In the past we used DFP and adsense to deliver the ads on our forums. I noticed that when we started using DFP our ad impression's went up even doubled. How dose this happen and why?

I noticed that when we started using DFP our ad impression's went up even doubled.

Did you select "Copy Adsense targeting" in the Ad Placement set up in DFP?
According to DFP Help, that will cause channels to appear twice in your Adsense reports.

By selecting Copy Adsense targeting and selecting a channel, you can copy AdSense channel information to your placement and continue to generate revenue from AdWords campaigns that are targeting your site.
Copying AdSense targeting settings will not affect your channels in your AdSense account. However, please note that any channels that you copy will appear twice in your AdSense reports.

[google.com...]

I checked in with a member of the DFP team to help clarify this question. Here's what he had to say:

There's two ways to run AdSense in DFP: (1) Through the integrated feature or (2) as an order similar to how you traffic your other orders and networks.

(1) By enabling AdSense for an individual ad unit, you'll be able to ensure that you always have an ad to serve if no other ads are available. Additionally, if you're trafficking any other non-guaranteed ads to that particular ad unit, AdSense will be eligible to compete on price with your other non-guaranteed advertisers to ensure the highest paying ad is always delivering for you. Through a process called Dynamic Allocation, AdSense can compete in real-time with your non-guaranteed inventory in order to deliver the highest paying ad available. DFP will show the ads that will generate publishers the most profit, whether they're from ads they’ve booked directly in DFP or Google AdSense. Google will always serve the highest paying AdSense ad available, and will never lower the price of the winning ad, or reduce a publisher’s earnings from it.

If you're worried about customization, for every ad unit, you can customize the look and feel of your AdSense ads such as the color, ad type (text/image), fonts, etc. Lastly, using the integrated feature gives you the ability to track all of your AdSense reporting data using the 'AdSense' report in DFP.

(2) Running AdSense as a line item is another route you can take, but it's not quite as automatic as the integrated feature. You'll have to setup delivery settings such as flight dates, ad unit targeting, and upload the AdSense creative tag. Any AdSense impressions served in this manner will not show up in your AdSense reports in DFP, but rather in your Order reports.

So in summary, if you're looking for an automated way to help you fill unsold inventory and maximize revenue we suggest option 1. If you're looking for greater control over when and how AdSense delivers, go with option 2.

Good luck!

CoachM, checkout this post [adsenseexperts.com...] by StarBug, according to his guide, it's best to setup Adsense as a new line.

@realmaverick

I said that you are right. But let me add one small "but" to this.

I wrote my DFP Guide (the one you are linking to) as an AdSense Publisher who mostly serves AdSense Ads.
And if you are like me and direct sold inventory is by far less then your AdSense inventory by all means go with my guide.

However if AdSense is just a fall back option and your inventory is mostly sold directly to advertisers then you might want to consider using the DFP AdSense option.

The main disadvantage in the DFP AdSense option is that you can't track them via channels.
This (at least for people like me) is a huge disadvantage.
The advantage however is that you can have AdSense actually compete with your direct inventory and only serve AdSense if you actually earn more with it then with your other inventory.

But I want to warn some folks.
I sometimes read "I use the AdSense DFP integration to compete with imaginary ads with high CPC/CPM prices so AdSense only serves high paying ads to my site".
This is a stupid idea (sorry to be so blunt) but you are shooting yourself in the foot. Yes you will only get AdSense Ads worth more then your set CPC/CPM BUT you will get a LOT less Ads shown and because your other inventory is imaginary you earn a lot LESS!
So think twice before using this approach.
In most cases you get the best result by following the implementation instructions I gave in my how to guide linked above by realmaverick.

Thanks for clearing that up. Also very good point about the imaginary ads. I thought about it myself, thought if it's possible why isn't everybody doing it and then I concluded it was likely to cause the issue you mentioned. Unless of course you managed to find and keep on top of the threshold? hmm. I'd not even attempt it.