Advertising is not going away. Let's face it, people are just not willing to pay when it comes to the type of games that are popular on the iPhone. That's in large part a result of the race-to-the-bottom environment Apple created with App Store. Advertising is what makes this economy work.
Whether it's ultimately a good thing or not to kill advertising is a debate I'm not going into (tho, I'd personally err on the side of it being a good thing long term). But, good ad targeting and CPA has the effect of improving the ad experience for everybody: making more money, and seeing more relevant ads.
Admittedly, I'm biased since I'm part of a mobile advertising startup, but I think Apple fucked up here. Having a way to uniquely identify a device across apps is very important. I'd suggest creating a unique identifier on device installation, and formatting the device would reset a new identifier. I know for a fact that if we were to play by Apple's rules, and this goes through, we're going to be very hurt by this change.