(1) Because the more irrelevant ads they show, the more accidental clicks they can collect, and the more ad revenue. There will be individual clients (e.g. Adobe) who probably have some measurable results, but my guess is that most of their advertisers show pretty good metrics in terms of "cost per click" etc, and aren't paying close enough attention to realize that their real return on ad spend is extremely low.

(2) Reddit's just as incapable / uncaring about writing good ad targeting as they are about constructing the rest of the site.

Pick one. Aaron Schwartz would be furious at the current state of reddit.