It's just PR speak for "we'll look for ways to make money with it that don't suck too much". Don't take PR speak too seriously :)

You can argue (half reasonably I think) that a more targeted advert is better for the user...

I certainly enjoy them a lot more. I saw an ad for an inexpensive VPS service on Facebook a few days ago that I wouldn't have heard about otherwise. It's a lot better than random Vistaprint ads.

I use services like Yelp, Netflix, and Amazon to give me targeted recommendations all the time. If ads could somehow read my mind and bring up good recommendations on my browser's sidebar that would actually be very valuable.

Usually I'd agree with you, but I could see that being true for Tumblr. When I was using Tumblr actively, more than half of the content I followed was some expansive form of advertising, e.g. http://magnumfoundation.tumblr.com/

Agreed! Looks like it was a slight hypocricy on my part :D