A site wants to purchase ad space on my site
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A website wants an ad space on my website. I want to know if I am allowed to us
The blog I need help with is: (visible only to logged in users)
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Short answer: No.
User advertising is, except for a couple very narrow exceptions, not allowed on wordpress.COM. For the exceptions, see the last sentence under “Affiliate marketing blogs” in the bottom set of bullet points in the “types of blogs” link below.
http://en.support.wordpress.com/advertising/
http://en.wordpress.com/types-of-blogs/
http://en.support.wordpress.com/affiliate-links/
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