I Don't Understand Google Adsense

Image via Wikipedia

I thought I understood how it was supposed to work.

1. Google reads the content of your webpage to create keywords.
2. Advertisers bid on the keywords 
3. Appropriate ads are placed on the webpage.
4. Webpage owner paid when ads are clicked.

See it's #1 that doesn't appear to be working for me. Google keeps giving me ads based on my Arma blog's tittle "Sandbox".
If I was actually trying to make money off this blog I'd be upset, because no matter what I do Google is not serving me ads based on my content, keywords, blog categories, or meta tags. I've filtered my Adsense categories down to Video Games, Sexuality and Dating. Still I get ads for sandboxes. 
My next step is to use the Competitive Ad Filter and list every toy site that I notice popping up.