AdAway is an open source ad blocker for Android using the hosts file.

Description
AdAway is a utility used to manage hostfile entries. AdAway doesn't directly block ads; it limits unwanted ads by blocking servers that distribute those ads to websites. Modifying hostfile entries is also useful in blocking ads on some Android apps.
Website with Source code and Issue Tracker
https://github.com/AdAway/AdAway
Translations
Help translate AdAway on https://www.transifex.net/projects/p/adaway
Donate
You can donate money to support the development in-app.
Permissions
AdAway requires the following permissions:
INTERNET to download hosts files and application updates. It can send bug reports and telemetry if the user wants to (opt-in only)
ACCESS_NETWORK_STATE to restart VPN on network connection change
RECEIVE_BOOT_COMPLETED to start the VPN on boot
FOREGROUND_SERVICE to run the VPN service in foreground
REQUEST_INSTALL_PACKAGES to update the application using the builtin updater
QUERY_ALL_PACKAGES to let the user pick the applications to exclude from VPN
Licenses