It's mainly an arms race to distort natural market outcomes. Coca Cola doesn't spend over a billion dollars a year advertising because they want to make you aware of some new fact. They just think they can make much more than that billion back by manipulating you.
As far as I know, it's just another business expense, which means you deduct it from your profits. Coca Cola paid about 17% in taxes for 2010 [1], so if you squint hard enough I guess you could look at it as a 17% subsidy. But since that's true of any reasonable business expenditure, I don't see it as a significantly distorting incentive.
[1] http://www.stock-analysis-on.net/NYSE/Company/Coca-Cola-Co/F...
Advertising is there to make sure you're aware of something. It's telling you "Hey! There's this product/movie/service etc that you might not have known about".
I find advertising extremely useful to know about new things.
I'm not sure what conspiracy you think I'm suggesting. There is nothing particularly hidden about what advertisers do. Go talk to people who have made ads for a living. Or take a media literacy course. Heck, go watch the Superbowl beer commercials and tell us what novel product information is being conveyed there: http://dailycaller.com/2011/01/27/top-10-super-bowl-beer-com...
A major target market for alcohol is those either underage or just starting drinking. Habits and personally preferences are frequently set very early on - Superbowl beer commercials may be designed for press, but a significant bulk of advertising money is spent by beer companies to convince people who have just started drinking that their brand is the right brand.
Besides, if advertising didn’t exist or was illegal or something, couldn’t we just create a webapp to let people exchange information about interesting products and services and that would be the end of that problem. No need for information about products and services to be so pervasively integrated into every nook and cranny of our society.
You talk about one's psychology as if it's something separate that you can choose to act upon or not. That's a false split; one's psychology is the mechanism that does the choosing. That is what is getting manipulated for profit.