oh, those rose-colored glasses you wear.
yes, advertising has its own set of problems. but let's not pretend that it is only harmful. since you want to take a black-and-white view of the world, here are some specific examples.
do you like slashdot? funded by advertising.
do you like penny arcade? funded by advertising. (or basically any other webcomic getting a modest amount of traffic)
how about google? gmail? let me tell you, bandwidth doesn't pay for itself. your awesome free webmail is paid for by... advertising.
i could go on, but hopefully you are starting to grasp the situation a little better now.
sure, some of those things could survive with a paywall or donation model, especially now that they are already established. but the barrier to entry all of a sudden becomes much greater.
amusingly, advertising HELPS a free and open internet, in that it's very easy for anyone to start a site up and have it naturally fund itself. You don't need a big pile of startup cash or a devout following that will make the commitment of subscribing or donating. Without ads, how are you going to pay your hosting costs for anything more than a trivial amount of traffic?
you can make an awesome site, and make it freely available, but you will become a victim of your own success - if your site actually DOES become huge, so will your hosting bill, and you'd better have some plan in place to pay for it.