It's not easy keeping up with those wily ad serving companies so we'll also setup a way to keep your ad blocking lists up to date as part of this tutorial.
I used many pages as inspiration in order to set this up, including, but not limited to:
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http://sfxpt.wordpress.com/2011/02/21/the-best-ad-blocking-method/
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http://www.debian-administration.org/article/Blocking_ad_servers_with_dnsmasq
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http://willitscript.com/post/39397777079/raspberry-pi-as-an-ad-blocking-server
- http://learn.adafruit.com/setting-up-a-raspberry-pi-as-a-wifi-access-point/overview