True, but in terms of privacy those kinds of ads are mostly a non-issue (and speaking for myself, I'd probably be happy to see them).

If a site is serving ads from their own domain, that's OK. As a pi-hole user I'm trying to block automated ad networks as those are the worst culprits when it comes to tracking and serving malware.

I visit some sites that sell their ad spaces directly to advertisers and create and host all creative themselves. I have no issue with those ads.

DNS based ad-blocking has limitations. YouTube does exactly this, with ads served from the same URL as the videos. It's a better than nothing solution that will cover 95% of the needs of the whole network. For the rest you can add a browser based adblocker, where possible. Or even firewall rules.

My understanding is that it accomplishes the same thing but for every device on your network rather than having to manage host files on each device. It also works for those where editing the host file isn't possible.

Not much, except it's on another machine and is a central point of config. Can even be used to hand out DHCP

Mobile phones. You can't modify the hosts file on an Android phone without rooting the phone. I'm not even sure how you would do it on an iPhone.

Both of them, however, allow you to manually specify the IP of a DNS server in advanced network settings.

Privacy and ad blocking for whole network instead of just one device and you can also add your own custom dns servers for extra privacy.

For ex: Pihole + Unbound

Works for devices with hard to access hosts files (IoT garbage, smart TVs)

It looks like pihole supports wildcards better maybe

Yes, it can run on any host in your lan.