All it means is that I won't buy a version of the kindle that comes with ads. If I pay for something, I won't accept ads. I no longer watch broadcast or cable tv for exactly this reason. I am fine with ads for free services but death to you if want to be paid twice.
It's not getting paid twice. The reason there's no option for "free with ads" is because ads have diminishing returns. Each extra ad you show makes customers less likely to buy a given product. Advertisers won't pay as much if they're part of a giant block of ads.
For the company to get the same amount of money, the trade-off curve looks something like this:
Pay $x, see 0 ads.
Pay $0.75x, see 1 ad.
Pay $0.5x, see 4 ads.
Pay $0.25x, see 20 ads.
Pay $0, see 50 ads.
Some customers prefer to pay with their eyes instead of their wallets. You don't like to do that. I don't like to do that. But it's fine that companies give us the choice.
Also, you pay for broadcast TV?