I can accept the errant billboard here or there. In THPS1 on the PSX, there was the Mountain Dew billboard here and there. That was fine. Billboards exist in the real world, too. In Burnout 3, there are similar billboards for a number of different games by EA, and a deodorant one as well. Doesn't bother me, really. It doesn't command my attention, it's simply scenery.
Crazy Taxi has people asking for a ride to KFC. I guess that's not a problem.
I was a little put off in Def Jam 2, the phone you use is a Sidekick. Not too put off, I own one myself. I like it. It's sort of ridiculous, though.
I played the Need for Speed Underground 2 demo after reading this, to see how I felt about the advertising used in it.
I think I recognize the Cingular orange icon man in the corner of the screen at all times. That's obnoxious. It doesn't advertise per se, although it does establish the brand, if you aren't familiar with it already.
The BK doesn't bother me either. My anonymous driver man never insisted we stop there for a Whopper (tm,) and frankly, it'd be out of place to see no fast food places in a city like that.
I suppose as long as the brand names aren't out of place in a game, it isn't really an issue. In fact, I've only ever been put off by how one-sided the advertising is. It's not like Coke and Pepsi are fighting for space in the new GTA game.
I would be rather upset by a game using the advertising directly in the gameplay. For instance, you have to eat in the new GTA coming out on Tuesday (I'm quite looking forward to it, if you haven't noticed.) If eating the "standard" fast food was worse for my character, and more expensive than eating say, Taco Bell, I'd put up a stink about it. If I need to buy shoes in a game, and the brand name ones give me a better stat boost than any other in the game, it would cross the line of comfort as far as I'm concerned.