As long as there's an option to remove them, I look at ad-supported games as a demo. I'll always gladly pay to remove the ads if I like the game enough to play it more than a couple times.
Can be, but it's possible to serve ads without any activity/data tracking. Not as profitable, but that's how it used to be done - simply guessing what the users may be interested in and A/B testing ads for various niches until you hone in on the most profitable ones.
Ads are pretty cancerous, but the easiest way to start monetizing free content/software.