The problem is when product placement controls the scripts.Product placement is a red herring, in my opinion, but I guess it's because I've trained myself to ignore it unless it's so blatantly-obvious that it's impossible to miss (like a fire-engine red, neon-infused T-shirt that says DRINK COCA-COLA OR BE DAMNED TO HELL FOR ALL ETERNITY, MWA-HA-HA-HA!!!...or something like that). People who critique certain video games are often complaining about product placement, without realizing that in sports like racing, endorsements are how many racing teams are able to participate in the first place. With TV shows and movies, I generally figure that it's a part of reality that certain characters would drink things like Coke, or eat Godfather's pizza, or use Dawn dishwashing detergent. This is why I call it a red herring: until people point it out, a lot of times it goes unnoticed; but when it is pointed out, it automatically becomes a culprit, presuming that advertisers are trying to control the minds of the viewers (which may be true, but that's a different post). So it's not the product placement itself that is the problem, in my opinion; it's when people keep saying, "Ooh, look, look, there it is!"
It's like that old philosophy course joke where the professor tells his students to NOT think about a purple elephant...betcha you are now.:P
Product placement is not noticeable unless it controls how scripts are written (or in the case of music when that song that really doesn't fit is shoved onto the episode where an original song would have made the show better - but oftentimes the inclination of some producers to play record mogul is also at fault).
The new James Bond movies, for instance, are great examples of how not to do it. The languishing shots of commercial logos and sometimes entire scenes that are essentially ads make these movies hard to watch for me (and I've missed most of them consequently and won't buy them on DVD).
CSI NY had a particularly galling one a while back where the whole episode was articulated around selling you ringtones. It was gross, and come to think of it, I stopped watching that show shortly thereafter.
One of NBC's many faults is that Ben Silverman thinks the more the better when it comes to product placement. It's the "Silverman Doctrine", a strategy that keeps failing because it doesn't respect the viewers.