Apart from the fact that a screenshot utility - by nature - should have nothing to do with tampering Google search results, the developer of this extension could handle the situation more decently by explicitly mentioning this feature in the description page, setting the option as default-disabled and then ask the users to support the extension by enabling this option manually.

I am not sure when though the software was updated (either to have this checkbox or something else) according to Joel (developer) http://www.seroundtable.com/google-amazon-treatment-13881.ht...

With an option like this clearly visible, might this be an acceptable way to make money with a Chrome extension? There certainly don't seem to be many options available for developers, apart from the other highly annoying way of periodically throwing the user to a "your extension has been updated!" page with ads on it.

Would've been absolutely fine if it were:

1. Disabled by default 2. Publicized properly (and not sneaked in)

Not in my opinion. I think you owe the user a clear indication about that it is an add, and from who the add comes. Just modifying pages like that is malware behavior.

If they clearly tell me it's their add then I can chose if I want the extension or not, so removable adds is less of an issue.

Yup. I would still have happily used it. Now there is just no telling what else they may do without telling users.