If a site is serving ads from their own domain, that's OK. As a pi-hole user I'm trying to block automated ad networks as those are the worst culprits when it comes to tracking and serving malware.
I visit some sites that sell their ad spaces directly to advertisers and create and host all creative themselves. I have no issue with those ads.
DNS based ad-blocking has limitations. YouTube does exactly this, with ads served from the same URL as the videos. It's a better than nothing solution that will cover 95% of the needs of the whole network. For the rest you can add a browser based adblocker, where possible. Or even firewall rules.
My understanding is that it accomplishes the same thing but for every device on your network rather than having to manage host files on each device. It also works for those where editing the host file isn't possible.