To answer some of your questions: Privoxy does at least two things for you. It strips out some unwanted cookie behavior, and it strips out unwanted advertisements.
Centralize advertisement sites are bad for several reasons. One is that they get items like I'm on somesite.com/page1.html, and I'm asking for an ad. I'm now on somesite.com/page2.html, and I'm asking for an ad. I'm now on othersite.jp/deep/path/download.html, and I'm asking for an ad. They get enough information that -- besides just serving you ads -- they are tracking who you visit, where you go, how you got there, etc. I have no problem with ads. I have every problem with annoying 30 FPS animation. I have every problem with popups, and javascript changing my settings I have every problem with tracking what I do/where I go via a data minable service. I have every problem with a third party being subponeable to get information trivially that would be impossible to get if they had to get a search warrant. (U.S.A. concern here). And, I have every problem with a third party deciding that it can sell this information to whomever it wants, for whatever price, giving me nothing. So, I have privoxy to strip out advertisements. It works better than a giant /etc/hosts file does. Oh yea -- it also strips out some troublesome javascript behavior. Can't stop them all -- that's really a case of "The browser, having gotten the full file to display, now needs to pass that through a security program". Instead, they (every one I've seen) just assumes that anything generated by the scripts is valid and safe HTML. Even if it's a script that is generating a new script that is going to grab data on your system and send it back.