Well you know the saying. When something is free, you're the product.
Personally I don't mind. I love Firefox and the work they've done all these years and if that's the only way to keep them afloat then so be it. I just hope the implementation won't be too intrusive.
Not always. If something is free, and it is a commercial company offering it, then you are probably the product.
But if the offering is from a not for profit company, a charity, or volunteers building something open source for their enjoyment and to contribute to the community, then you are not the product.
As for Mozilla, I'll leave you to make up your mind. I tend to agree with you and I love Mozilla too (but hope that Iceweasel doesn't have this :)
As an open source developer myself, I say that you are way too optimistic about it. With a few exceptions, open source projects tend to be consistently underfunded. I get the feeling the HN crowd doesn't realize/appreciate/care about this fact.
Let's take a look at two contrasting open source projects: Ruby and the V8 Javascript interpreter. Ruby is dog slow in comparison to V8. They both languages are extremely dynamic and present similar optimization challenges. Why? Because Google has enough cash to hire world-class experts to make V8 fing fast. One of the guys behind V8 has 20 years of experience with writing JITs for dynamic languages. The guy practically invited JITs for dynamic languages, and was also one of the main contributors of the Hotspot JVM JIT.
In contrast, Ruby does not. I met up with a panel of Ruby core developers a couple of months ago. It became extremely clear that Ruby is underfunded. Ruby has maybe 2 full time paid developers. They are skilled, but are nowhere near as skilled as the V8 guy when it comes to optimizing dynamic languages. They also lack funding for infrastructure projects.
Web browsers are one of the most complex pieces of software in human history. Mozilla literally spends millions per year on developing Firefox. Sure, a browser might exist in a completely free, lowly-funded FOSS form. But at what expense? Just look at Ruby vs V8. You can't just hand-wave away the importance of money.
Personally I don't mind. I love Firefox and the work they've done all these years and if that's the only way to keep them afloat then so be it. I just hope the implementation won't be too intrusive.