Hi JazyLcan, welcome to the forums
You've pretty much hit the nail on the head with your reasoning - Digg, Reddit, StumbleUpon, Fark, or whatever other social bookmarking site has one purpose to most webmasters, which is to send them traffic. Hitting the front page, or getting popular on these can send you
a lot of traffic. I've never had a Digg frontpage, but I had a few pages get pretty popular on SU, and was getting ~4000 uniques/day from them!
Unfortunately you also point out the massive downside - the traffic is of exceedingly poor quality. I measured conversions from my SU traffic in terms of membership sign ups, and I think I had 2 or 3
total - it would hurt too much to work out the %age! Ad CTRs are likely to be similarly low. The reason for this is, in my opinion, that the visitors you get are generally very web savvy, so they recognise adverts and ignore them, consciously or even sub-consciously! Personally when I browse Digg/Reddit then I click the link, read the page then close the tab. It has to be a page of serious interest/quality to make me click through to another page.
So you might ask what is the point of getting this traffic? Well I can see two points:
1) Getting lots of traffic from webby types means many potential people who could link to you. Obviously this is great from an SEO point of view.
2) Artificially inflating traffic pre-sale. Now I most definitely do
not advocate this, but it certainly goes on. That's why it's so important to look at what the traffic is, as well as how much when evaluating a site for sale.