The three-month trial will use SeaChange's ad insertion technology to place ads before and after on-demand content in real time, allowing campaigns to remain current and specific to time of day or region.
Ads will be matched to programme genres and a range of ad lengths will be tested, including single 30-second pre-rolls, consecutive pre-rolls and end rolls.
The number of ads will be capped and there will be a limit on the volume of programmes that will have ads placed around them.
Advertisers involved in the trial, which is taking place across north London from this week, include Kelloggs, Lurpak, O2, John Frieda, COI Army, Alberto, General Motors, Royal Mail, Littlewoods, Bodyform, John Lewis and Anchor.
Mark Schweitzer, chief commercial officer at Virgin Media, said: "Virgin Media has pioneered on-demand TV in the UK and we continue to innovate with new content, interactivity and functionality.
"As consumer usage of on demand continues to build, this trial will help us explore the best ways to reach a large and growing audience with engaging and relevant advertising."
Virgin Media is also working with On Demand Group (ODG) for content aggregation and both Rentrak Corporation and ODG to measure content performance throughout the trial.
Ids and Channel 4 Agency Sales are managing the advertising space for the trial.