They're not so bad when they're not broken; a lot of the time, you can't even tell that an ad is using them, because it's natural and appropriate.

Here's the (best) use case: let's say I sell garden equipment: hoses, sprinklers, garden gnomes, etc., so I advertise on those terms as keywords. I could have one ad that says "Best Garden Equipment", but tests show that ads work better if they specifically name the product that the user is looking for. So I can use keyword expansion to have the ad say "Best Garden Hoses", "Best Garden Sprinklers", "Best Garden Gnomes", etc., and not have to manage a lot of different ads.

This can be used in much broader cases, too, such as if I have hotels in 500 US cities: load up the keyword expansion with the names of all 500 cities and run an ad with title "{CITY_NAME} Hotel Rooms".

The problem is when people load it up with a jillion keywords in the hope that, if they get a click, they'll look for matches in their product database afterwards, and sometimes they fail.

So, yes: frequently lame. But when it's not misused, pretty useful.