Yes it does work for everything- a website can label its content with keywords and advertisers can choose to advertise on sites with specific types of content. So IGN signs up for an ad network and says that their content is about "video games." Then Rockstar says to the ad network, "run my ads on sites about video games." A person reading IGN is clearly interested in video games and we don't have to do any tracking to figure that out. They could even go so far as to show Playstation ads on articles about Playstation games and Xbox ads on articles about Xbox games. The ad can be targeted by the content a person is looking at, not where they've been in the past. If anything, a video game ad on a video game website is more effective than showing me a cosmetics ad on a video game website.

So companies can still have effective ads on relevant sites, ad networks can still facilitate the in-between, and users don't have to be tracked. Advertisers already use Google AdWords to show ads to people searching for specific keywords, this is just an extension to show ads to websites with specific keywords. Websites are already working with keywords for SEO, it's not even extra work for them.