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Behavioural Targeting – "Smart" Marketing or Dangerous Privacy Violation?

Is the application of online behavioral targeting through the portal players an example of “smart” marketing, as a recent One Degree interviewee suggests or a “hornet’s nest” of potential privacy issues as Cyber-lawyer Eric Goldman suggests. You decide.
“Yahoo!”: Canada’s Hunter Madsen stated in Ken Schafer’s latest “5 Questions interview”: that:
bq. Most advertisers are dabbling in BT [Behavioral Targeting] these days … but the smartest players dived right in more than a year ago, and they’re pulling results that would surprise you.
Leaving aside Mr. Madsen’s objectivity in deciding which “players” get to be considered the “smartest”, I find it interesting that he is the second employee of a major portal to pitch me on “BT” in the last 2 weeks (albeit Madsen’s was an indirect pitch). Clearly, BT is all the rage in the portal community and it’s a race to see which portal player gets the most companies onto their proprietary system.
But, before we all run out and sign deals with the portals in an attempt to be one of these “smartest” players let’s do a quick review of what exactly is being proposed so we can make a marketing decision that is best for our companies and not for one that is best for the portals.