Does Google penalize your search ranking when you place ads on your site?

The presence of ads does not have any penalty.

However, If you put too many adsense units at the top of your page, Google would penalize you for a bad user experience. Maybe you could test with different combinations and see whether rankings change.

I assume the drop was in search referral traffic - did specific keywords get hit more so than others? If you're whole site has been penalized, you should see the affect across all your keywords. Also check out webmaster tools for more insight - https://www.google.com/webmasters/tools/home?hl=en

Slightly OT, but I've wondered why Microsoft doesn't implement such a penalty for Bing.

If(Page contains Adsense or any general ad server) Then drop off front page.

Instant increase in search quality results. Eventually taking market share from Google.

Does the page load more slowly? If it does, people may be just leaving your site out of impatience. Also, see this comment thread:

https://news.ycombinator.com/item?id=6423171

No, it hasn't taken a performance hit.