If you will suffer a brief crash course on ad terminology, you are describing "placements". A placement with an ad in it shown to a user is called an "impression".

I agree that advertisers would pay reddit more for better ad space (also called "inventory") but that doesn't just happen automatically.

Right now, I would assume they are integrating with some third party ad network and probably use fairly generic targeting information. The cost in time and money to either deepen that integration or rip it out and make a custom ad network is probably significant.