I know someone who left their Brand Manager job to do blogs full-time... which sure as hell says something about the earning potential!
Blog sponsorship is a major way of getting major exposure and income, and also the more blogs become more commercial, a lot of big advertisers want to get in on that action. AdSense is tiddlywinks really, targeted advertising, good sponsors if possible, killer content, slick design and anything that prevents a blog from looking like a spam board all go a long way in making it a goldmine.
You know, a bit of PR can never hurt either - once you have a decent traffic rate, promote that baby like anything and get people talking. Big boy advertisers like to feel special, so make your blog the coolest thing they've seen and they'll beg you to get on it.