Hotmail isn't ad-free, but I suppose they might not be targeted ads. I genuinely have no idea if that's the case. Hotmail definitely isn't Microsoft's bread and butter though.
I have a question regarding these so-called highly secure email providers which respect privacy. Is the data on the servers of these services encrypted? I mean, isn't it too resource consuming to do something like that? And if it is encrypted, do they do it like LastPass, with a client side JavaScript decryption module?