The theory is that sites bid for their ads to be placed on contextually relevant web sites with the highest bidders getting the best adsense spots (the higher the better). If you only show 4 ads in 1 block, then adsense will place the highest 4 bidding advertisers in those spaces netting you the highest profit. The more ads you show, the more lower-bidding advertisers show up on your page that when those get clicked, your cpc becomes lower than it could be if they weren’t on your page to begin with.