Anecdotally: Just about everyone I've met who run affiliate marketing and/or direct marketing companies (not necessarily their employees, but definitely the owners) are probably the most shady individuals I have ever dealt with.
(Just adding data points to your anecdote.)
It's possible to do it ethically, which is what I tried very hard to do (at the end of the day it's just advertising and a lot of it depends on the product). But it becomes incredibly difficult to pick products that aren't essentially rip offs. The affiliate networks are as much trying to scam the marketers (which is why his advice of picking only the bigger networks is good).
I used to market stuff similar to what JML sell (i.e. fairly niche "time save" appliances). Most of the products were good - but ultimately the kind of thing you buy on a whim and then use once or twice a year.
The margins aren't great for the time input [nearly failed my first year outright] so I moved on to other pastures (where ethics were more prevalent too)
Sure there are legitimate affiliate marketers making decent money (like someone established with a good forum on webhosting), but another problem is that for an upstart to do that they have to apply less honest methods.
Affiliates create value and jobs for their customers and contribute in a positive way to the economy.
How much value has your zero-revenue startup created for anyone?
For one thing, nobody has promised a huge payout. Investors have evaluated the risk of your company before making their investment, and unless you do something stupid with the money (e.g., send everyone on vacation) there's really no ethical issue with it. If you gave it your all and fail, there's no way you can twist this into some sort of ethical issue. Doing so IMHO is dishonest and self-deluding.
The "jobs and economy" defense is also pretty flimsy. Spam also creates jobs, value for their clients, and contributes to the economy, are we going to start defending that now?
There's no question that a large portion of affiliate marketing falls on the wrong side of morals/ethics, if not the law. The bulk of what I've seen out of that corner of the intertubes is scams that prey on unsuspecting consumers... to compare this with legitimate web startups is really puzzling.
This isn't just holier-than-thou posturing, honestly. I've done shady things in the past for a quick buck, but at least I've never deluded myself into thinking what I was doing was good.
[edit] Poster below has a point, saying "bulk of" to describe the entire affiliate industry is unfair.
I'll question it. Do you have any sources or statistics to back that up?
Amazon claims they run "the most popular and successful" affiliate program on the web, for example, and they're about as clean as you can get.
But, as I see it, many customers sign up for rebill trial offers because they think they can a) game the system and get something for free or b) are truy gaming the system, signing up for offers to get cash as part of so-called "incentivized traffic"
I'm sure there are some unsuspecting consumers who just want to try something and shouldn't have a hard time cancelling.
The problem here isn't the affiliate networks, or the affiliates. It's the advertisers. They are the companies responsible for customer service and providing an ethical experience.
The reality is that it's plainly obvious to the marketer if their offers are legitimate or scams, and when this awareness is so clear it's hard to ride the moral high ground and claim innocence.
It's like giving someone a bag of candy where you know a large portion is poisonous - sure, you didn't poison the candies yourself, but to say that you're faultless IMHO is disingenuous.
Then on the other side of the spectrum, you have the people making shell sites with sales pitches and shady offers crowding up the Google results, and forums of people trying to figure out how to make a quick buck without adding anything of value. But you get that with adsense and other types of advertising as well.
But a continuity offer that clearly discloses its terms (think Netflix) is really not unethical in any way, and your blanket dismissal of affiliate marketing is ridiculous.
I've seen people say on here that ALL advertising is shady and unethical because it makes people spend money on things they don't need. Statements like this are the reason you aren't making any money online.
So many websites do affiliate marketing in some form that you can't just throw them all in a bucket of 'shady'.
If you do a blog post comparing slicehost to linode, and have your signup links in it, that's affiliate marketing. Nothing particularly shady about that.
At each instance, of course, their personal information passed through companies who had no moral qualms about holding onto those leads and passing them off to a future client as new.
That's what's shady about it.