An answer to #1 is: I think so, and here is an actual ad code chunk (below) that you can examine to see if it is up to snuff.
<div id="googleheaderdiv">
<script type="text/javascript"><!--
google_ad_client = "pub-12345678912345678";
//dj.net leaderboard (pics only) 728x90, created 12/8/07
google_ad_slot = "0123456789";
google_ad_width = 728;
google_ad_height = 90;
//--></script>
<script type="text/javascript"
src="http://pagead2.googlesyndication.com/pagead/show_ads.js">
</script>
</div>
The answer to #2 is, once you've implemented the above code, the Google system knows from that code a couple of things: (1) it knows which ad publisher you are (this allows you to get paid) (see the 16-digit number above) and (2) it knows which of your ad setups (created on their site, and stored there as well, for management and later editing, etc) is being called for (see the 10-digit number above).
The way to tweak your ad, is not by tweaking the code, but by managing your ads at Google.
The code in your site varies for various ads that you've created. So, not every ad code chunk will look like the above. But each code would hopefully be as compliant with the strict rules of xml.
PS: Please note that the fictional 10-digit and 16-digit numbers above would be one's actual numbers. (If someone used your PUB number in implementing ads on their site, you would get paid instead of them. Also, if they were doing it maliciously, to get your account cancelled by clicking the ads themselves as though they were you clicking your own ads (which is prohibited), the Google team would (should be able to) examine the situation and tell it was not really you (IP addresses, ownership of the website used to host ads etc).)
Sincerely,
Doug Joseph