I remember when I was a kid, playing my NES in the late 80s and early 90s, and I'd see the occasional real company or product put in a game. For instance, Pizza Hut in the Ninja Turtles, or the Mitsubishi signs in Renegade. I thought it was kind of cool, because it wasn't common back then, and made the games feel more authentically real.
Nowadays, advertising is pretty common, and I don't appreciate it so much. I can handle it when it's done tastefully, but it sometimes isn't. The key to accepting or condemning it is whether it suits the atmosphere, or sticks out like a sore thumb. Some examples will paint the picture.
DOIN' IT RITE:
Rock Band. Yes, it does technically have some advertisement by its instrument selection, but it doesn't plaster signs all over the stages, or throw it in your face. In a game about simulated rock stardom, the authentic guitars feel right in place.
Shenmue. That game had some real product placement too. Remember your wristwatch? Timex with indiglo. However, considering how much detail that game had all around, it only gives off a vibe of realism rather than HAY BUY OUR STUFF.
YOU ARE DOING IT WRONG:
Guitar Hero 3. The guitars aren't really the problem, as they're there with the same reason of Rock Band, but some of the stages were such obvious advertisements. Remember that Pontiac music video level? It seemed so forced-in, out-of-place.
Need For Speed Underground 2. Suffers from one of the worst plagues of advertisement I've ever seen in a game. I don't have a problem with it using real cars, as that's more than reasonable in a racing game. It was an enjoyable racer, but it was just irritating to have to stare at that damn Cingular logo throughout the entire game. The world was also littered with Best Buy stores and billboards. While it might sound like some real stores would help authenticity, there was just no variety to them. Some of those billboards seemed especially shoveled in there. When's the last time you saw a billboard in a dingy back alley? It's kind of patronizing.
As long as it's done tastefully, it's fine by me, but in the case of those latter two and others like them, I hate feeling like I've paid for a commercial. It's really off-putting. In fact, that's part of the reason I stopped subscribing to an Xbox Live Gold Account. I didn't like paying them money and still getting car ads and crap on my dashboard.