This website explains it: https://pixelprivacy.com/resources/browser-fingerprinting/
Basically you send your user agent, browser and OS configuration like screen resolution, your primary system language, timezone, installed plugins and so forth as you browse the internet. Not so easy to block. In fact, avoiding fingerprinting 100% is almost impossible, because there are so many configurations. It is hard not be somewhat unique. Still there are ways to minimize the identifying information. Using Firefox, this is what you might want to read: https://support.mozilla.org/en-US/kb/resist-fingerprinting. Note, though, that even there it says that such techniques can "help prevent websites from uniquely identifying you", not prevent it entirely.
Sure. You can still be profiled, though. That can open doors for discrimination or other unsavory agendas. One also loses a measure of anonymity. Users don't clearly see how and know that they are tracked, meaning there's a loss of transparency.
It's not just about ads.