I actually don't get this mentality. You are saying you would prefer to receive irrelevant ads? To me the worst thing about advertising is its lack of relevance most of the time. When ads are targeted I at least feel like I'm getting offered things that appeal to my tastes. I find that much less bothersome.
I recently bought a faucet from an online plumbing company. I now find my browsing bombarded with ads for the same kitchen faucet, from that same company.
Of course this is a technology shortcoming. It doesn't mean that targeted ads are inferior, they are just not perfect.
The idea is that you get targeted ads for things you are looking for. Not always the recommendation is perfect, that is bad for you, Google, Publishers and Advertisers. If you can fix that you might be into something big.
I agree completely. The underlying assumption of Schneier's comment is that advertising provides no value to the consumer, which is untrue. Google has made advertising incredibly valuable to the consumer (they're clicking the links, after all!) which is the chief reason they're so profitable.
twoodfin said contextual, not irrelevant. Instead of adapting the ads to the user, you can adapt the ads to the content of the page they're being inserted on. The ads remain relevant (often more relevant, since targeted ads have a tendency to show you what you already know) without having to mine your personal data.
For example, if you go to Hack-a-day, all the ads are relevant for their user base, even though they're fixed and not automatically assigned by Google's All-Seeing-Eye.
Google could show me the most targeted ads in the world and I still wouldn't click them. So the difference is between things that I'll never click, and things that I'll never click but that needlessly aggregate data about me. That's an easy choice.
